The vast majority of home equity plans will utilize variable interest rates instead of fixed. Do not forget to compare this cost, as well as the APR, across multiple lenders. This way, they can build up their own credit history and not open themselves up to the possibility of taking on a debt too large, placing themselves, and you, in financial danger.īe careful when signing up for a home equity loan or line of credit - the disclosed APR does not reflect the total fees that are associated with the loan, such as closing costs and others. If you are asked to co-sign for someone, you may want to provide another option and suggest that they get a secured credit card. If there are late payments, this will affect your credit as well. Upon co-signing you may have to brandish financial documents to the lender just as the primary borrower would have to.Ĭo-signing for a loan gives you the same legal responsibility for the repayment of the debt as the borrower. Also, make sure that your liability is limited to the unpaid principal and not any late or legal fees. If you do agree to co-sign on a loan for someone, you can request that the financial institution agrees that it will refrain from collecting from you unless the primary borrower defaults. Clearly this can be a large financial burden, and it can also reflect negatively on the co-signer's credit. It has been stated by finance companies that in the case of a default most co-signers actually pay off the loans that they have co-signed for including the legal and late fees that end up being tacked on. A lender will usually not go after the co-signer until the borrower defaults, but they can lawfully go after the co-signer at any time. The co-signer enters an agreement to be responsible for the repayment of the loan if the borrower defaults.
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