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Has a close friend or loved one asked you to cosign a loan or credit card? You may be tempted to help them out. But does cosigning hurt your credit? Becoming a cosigner may not immediately affect your credit. However, there are many circumstances when this type of financial agreement could impact your credit negatively.

Before you agree to cosign on a credit card, student loan, car loan, home mortgage, or any other credit account, it’s important to understand the advantages and disadvantages of becoming a cosigner and what impact it could have on your credit score.

What Is a Cosigner?

A cosigner is someone who guarantees that they will be legally responsible for paying back a debt if the borrower cannot pay. Some of the best people to cosign are trusted friends or family members with a good credit history and a solid income history.

How a Cosigner Helps

A loved one might ask you to cosign to help them qualify for a loan if they:

  • Don’t meet the minimum income requirements for a loan
  • Have no established credit
  • Have bad credit
  • Meet the minimum income requirements, but their debt-to-income ratio is too high
  • Are self-employed
  • Changed jobs recently or their income is variable

Getting a cosigner only helps, though, if they pay their cosigned loan as agreed. Doing so will help them to build a good payment history, which will also give their credit score a lift.

If they manage their cosigned loan payments responsibly, they can reap the benefits and watch their credit score climb over time.

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How Cosigning Affects Your Credit

When you cosign a loan, credit card, or other credit account, you’re agreeing to be financially responsible for that loan. This means that if the primary borrower fails to make payments on the account, you’re legally liable for paying the remainder of the debt in full.

Although you’re the cosigner, lenders treat the loan as if it’s yours. Depending on the type of credit account or loan, it could impact your credit utilization ratio, which accounts for up to 30% of your credit score.

Does cosigning on a car loan for a family member affect your credit? Yes, lenders view this new loan as if it were your loan, affecting your credit utilization ratio. Depending on your specific situation, the new loan could lower your credit score almost immediately.

However, if the primary borrower continuously makes on-time payments, being a cosigner could positively impact your credit in the long run.  

Does Cosigning Show up on Your Credit Report?

Once you cosign a loan or credit card, it’s likely to show up on your credit report. In fact, the only way the new credit wouldn’t show up on your credit report is if the lender fails to report it.

It’s important to note that most lenders report loans and credit accounts to the credit bureaus. Even if the new account doesn’t immediately show up on your credit report, the lender could report late or missing payments at a later date. If the loan goes into default or collections, this too could be reported on your credit report.

Not only is the new account likely to appear on your credit report, but it’ll show as if it’s your personal loan. Lenders don’t distinguish between your personal loans and those that you cosign.

Does a Cosigner Need to Have Good Credit?

The answer is yes. Lenders treat cosigners just as they do the primary account holder. They want to know that you can financially afford to pay for the loan and have a good credit history. Once you submit the application as a cosigner, the creditor will conduct a hard inquiry on your credit.

Before you agree to be a cosigner, you may want to check your credit score with Credit.com’s Credit Report Card. While each lender has its own credit requirements, most expect a cosigner to have good credit with at least a 670 credit score.

What Are the Disadvantages of Cosigning?

There are numerous risks involved in becoming a cosigner. The most crucial disadvantage is the impact cosigning can have on your credit. Not only can becoming a cosigner increase your credit utilization ratio, but late or missed payments, repossessions, and loan defaults can be detrimental to your credit.

If your credit score drops, you could have trouble securing new credit in the future. For example, you cosign a personal loan for a friend, and this friend stops making payments and defaults on the loan. This could damage your payment history and credit utilization ratio as well as lower your credit score. Depending on the impact on your credit score, it could affect your ability to secure a loan in the future, such as a car loan.

Most importantly, if the primary account holder fails to make on-time payments, it could destroy your relationship.

What Are the Advantages of Cosigning?

The biggest advantage of cosigning a loan is that it gives you the opportunity to help a loved one build their credit. You can also help a loved one reach their personal and financial goals. For example, cosigning a student loan for your child can help them obtain the degree they need for their career.

If all goes well, cosigning a loan may also boost your credit score. First of all, having a mix of credit accounts makes up about 10% of your credit score. If this is a new type of loan, it could help you improve that rating.

Secondly, if the primary account holder continues to make on-time payments, it can help boost your payment history.

Disadvantage of cosigning Advantages of cosigning
You’re responsible for repaying the loan if the primary account holder stops paying. You can help a friend or family member build their credit and reach their personal or financial goals.
Late payments, repossessions, loan defaults, and increased credit utilization can negatively impact your overall credit score. Adding new credit could increase your credit mix, which accounts for up to 10% of your credit score.
Cosigning a loan could impact your ability to secure future credit for yourself, such as a car loan. If the primary account holder continues to make on-time payments, it could boost your credit score.
Issues with the loan and payments could destroy the relationship between the cosigner and the primary account holder.  

How to Remove Yourself as a Cosigner

Once you agree to be a cosigner, removing yourself from the account can be difficult, but not impossible. In almost all cases, you’ll need the primary account holder’s permission to remove yourself as a cosigner.

Some student loans and auto loans offer a cosigner release process. While this can make it easier, securing approval can still be very difficult. However, if the primary account holder has established good credit during the duration of the loan, it may be possible.

If the loan doesn’t offer a cosigner release option, it’ll likely require a new agreement with the lender to remove yourself as a cosigner. If the lender doesn’t agree to this arrangement, the primary account holder can consider refinancing the loan without a cosigner or taking out a consolidation loan. Since these would be new loans, both options will remove you from the cosigned loan.

Does Removing a Cosigner Affect Your Credit?

Removing yourself as a cosigner of a loan will also remove all the data related to that loan. So, if the primary cardholder made consistent on-time payments, removing yourself could actually lower your credit score.

If, on the other hand, that account has several missed or late payments, removing yourself from the loan could help repair your credit.

Questions to Think About

Before you agree to become a cosigner, there are several things you should consider, such as:

  • Do you have good credit?
  • Can you afford to take over the payments if necessary?
  • Do you trust the primary account holder?
  • Can the primary account holder afford the payments?
  • Does the primary account holder have a steady employment history?
  • Why does your loved one need a cosigner?
  • Are there other options to help your loved one build credit?

Knowing the answer to these questions can help determine if being a cosigner is the right option for you.

Source: credit.com

Apache is functioning normally

Apache is functioning normally

According to the Federal Reserve, 4 in 10 people who go to college incur debt to pay for their education. Currently, individuals with outstanding student loan debt owe as much as $100,000 or more, with more than 40% owing between $20,000 and $99,999. 

If you’re struggling with student loan debt, you certainly aren’t alone. Understanding your loan is an important first step in creating a viable plan to pay it back. You may be dealing with one of many student loan service providers, including Navient. Find out more about Navient below, including what to expect if this company is calling you, so you’re more educated about your student loan debt and avoid making mistakes on your student loans. 

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What Is Navient?

Navient is a student loan servicer. This means it’s a company that handles student loans, including the collection of those loans. Navient previously existed as an arm of Sallie Mae, the Student Loan Marketing Association. However, the company split off from Sallie Mae in 2014.

Is Navient Legitimate?

Yes, Navient is a real company with real contracts with student loan lenders. If this is your student loan servicer, it’s not a scam, and you can make your payments with confidence. Still, it’s always a good idea to keep records of all your debt payments in case you need to prove them later. 

Privacy Policy

What Does Navient Do?

Note that Navient is not the lender. It didn’t loan you the money for the student loan or buy the student loan debt from your lender. It’s more of a middleman between the borrower and the lender and is responsible for a variety of tasks, including:

  • Sending information about your student loan balances and when payments are due
  • Working with you on deferrals and other measures when you’re in school or after you graduate
  • Collecting payments from you
  • Working with you to set up payment plans when necessary
  • Reporting payments—both timely payments and late or missed payments—to the credit bureaus

Navient primarily services private student loans after ending its contract with the Department of Education in late 2021.

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Why Is Navient Calling Me?

If Navient is your student loan service provider, it may call you for a number of reasons. Navient reps may contact you due to:

  • A need to update your records or questions about information on your account
  • To ensure everything is on track while you’re still in school
  • Because your account is in danger of defaulting and you need to attend to it or set up payment plans

It’s important to pay attention to communication from your student loan provider so you can keep your account in good standing. Student loan servicers may also send you emails or mail, so watch for those types of communications as well. You should always know what company is servicing your student loan accounts so you can work with it to repay your loans.

Defaulting on your student loans can have great consequences on your finances, including your credit score. So, you should contact your loan servicer to find out what options you may have. For example, you can contact them to learn how to discharge your student loans, and for what programs you may qualify.

What Should I Expect When Navient Calls?

Always verify that someone calling about a debt is who they say they are. Check the phone number on your caller ID. You can look it up online or compare it with phone numbers listed on paperwork you might have from the company. 

Avoid answering questions with personal information. Navient reps won’t call you and ask for specifics like your account number or Social Security number. They already have all the pertinent information they need in their files. 

Whether Navient is calling you or you’re calling your student loan servicer, be prepared to discuss the best ways to deal with your debt. Have a plan for how much you can pay, and don’t be afraid to ask about payment plans and other options to help you get back on track if your student loan payments have fallen behind.

The Bottom Line

Student loan servicers want to collect the debt from you, but they also have a number of tools they can use to help you pay that debt. You also have options, including refinancing your student loans.

Not paying your student loans will affect your credit score. Always make sure you understand the terms of any loans or refinance loans and how they might impact your credit. See where your credit stands at Credit.com by checking out your free credit report card.

Source: credit.com

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Apache is functioning normally

A jumbo loan is a type of mortgage that surpasses the Federal Housing Finance Agency (FHFA) limitations and is used to finance expensive properties.

If you’re looking to purchase a property or a home in a more expensive area, it’s important to understand how jumbo loans work. Many individuals use jumbo loans to finance properties that exceed conventional loan limits. So, what is a jumbo loan, and who requires one? 

In this article, we’ll go over what jumbo loans are, how to qualify, and other considerations. 

What Is a Jumbo Loan?

A jumbo loan is a type of mortgage that surpasses the limitations the Federal Housing Finance Agency (FHFA) set for Freddie Mac and Fannie Mae. These two companies secure the majority of mortgages in the United States. Since Freddie Mac and Fannie Mae cannot guarantee these loans, there’s a higher risk for the lender and therefore, stricter requirements to qualify. 

What Is Considered a Jumbo Loan?

The limit for a jumbo loan differs from state to state and even county to county. In most parts of the United States, the jumbo loan limit is $726,200. However, more expensive areas have higher thresholds for a jumbo loan. For example, Orange County, California has a jumbo loan threshold of $1,089,300. 

How Do Jumbo Loans Work?

Jumbo loans work like traditional mortgage loans with set terms and a repayment schedule. Both fixed-rate and adjustable-rate jumbo loans are also available. Since jumbo loans can be risky for the lender, the requirements to qualify are stricter. 

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How To Qualify for a Jumbo Loan

Below are factors you’ll need to qualify for a jumbo mortgage loan. 

Good Credit Score

While there’s no hard and fast rule, most lenders will require a credit score of 700 or above to qualify for a jumbo loan. The average credit score in the United States is 714, which is doable for most Americans. 

If you don’t have a good credit score but are looking to qualify for a jumbo loan, there are steps you can take to improve your credit score. 

Large Down Payment 

While the minimum down payment requirement for a jumbo loan is just over 10%, a lower down payment often comes with higher monthly payments and interest rates. Most lenders require a 20 to 35% down payment.

The exact down payment the lender requires may also differ depending on the loan size, your credit score and other factors. 

Low Debt-to-Income Ratio

Another factor that lenders will look at is your debt-to-income ratio, which is the monthly debt you owe divided by your gross monthly income. Most lenders require a debt-to-income ratio below 43% to receive a jumbo loan.

Enough Cash Reserves

You will need to show proof that you have enough cash reserves, or liquid assets, to cover about 6-18 months of mortgage payments. 

Extensive Documentation

Last but not least, lenders often require you to provide extensive documentation such as bank statements, pay stubs, and tax returns. These documents show the lender that you have steady income that is unlikely to change. 

Jumbo Loan Pros and Cons

There are a variety of pros jumbo loans can provide to future home buyers including: 

  • The ability to purchase a luxury property. Jumbo loans provide you with the funds you need to purchase your dream home in your desired location.
  • Competitive interest rates. Jumbo loan rates are similar and sometimes even slightly lower than traditional loan rates. 
  • A single loan. Without jumbo loans, homebuyers would need to take out multiple mortgages. 
  • The finances to make renovations. You can take out a jumbo renovation loan to cover the cost of the home plus any renovations you do. 

On the contrary, jumbo loans have the following cons that you should be aware of: 

  • High costs. With a larger loan comes higher payments. Plus, you’ll likely have to pay higher closing costs and insurance. 
  • Strict qualifications. Jumbo loans have stricter qualifications that you might not be able to meet.
  • Large down payments. Jumbo loans typically require you to put a high percentage down. 
  • Limited tax breaks.  The Internal Revenue Service (IRS) only allows you to deduct interest on mortgages up to $750,000. As a result, interest on a portion of your jumbo loan likely won’t be tax deductible. 

Jumbo vs. Conforming Loan Rates: Is There a Difference? 

In the past, jumbo loans had higher interest rates than conforming loans. However, in 2022, jumbo mortgage rates fell below conforming loan rates. While these rates have since even outed, jumbo loan rates have remained competitive with conforming loan rates, as seen in the graph below. 

Jumbo Loan FAQ

Below, we’ve answered some common questions about jumbo loans. 

What Are Jumbo Loan Limits?

While jumbo loan baseline limits vary from place to place, they range from $726,200 to $1,089,300 in more expensive areas. 

Are Jumbo Loans More Expensive?

While they have comparable interest rates to traditional loans, they may be more expensive since they have higher payments and closing costs. 

What Is the Down Payment on a Jumbo Loan?

The minimum down payment for a jumbo loan is 10.1%. However, most lenders require a down payment of 20 to 25%. 

Should You Apply for a Jumbo Loan? 

If the home you’re interested in purchasing exceeds the conforming loan limits in your area, a jumbo loan could be your best financing option. However, this option is only available to those with the financial resources to meet the strict qualifications, so it’s important to evaluate your financial situation to determine if it’s right for you. 

Start by checking your credit score for free to see if you meet the minimum requirement for a jumbo mortgage. 

Source: credit.com

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Apache is functioning normally

What should you do if your mortgage company didn’t pay your property taxes? First, don’t panic, but do take immediate action. Start by contacting your lender, tax authority, and even your lawyer if necessary.

Getting an unpaid tax notice in the mail can be scary, especially when you know you have an escrow account and your mortgage payments are up to date. The important thing is to remain calm. Then, take the necessary steps to resolve the issue.

This article provides more information about how escrow accounts work and what steps you should take if you receive a tax notice in the mail.

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How Do Escrow Accounts Work?

Many lenders today require homebuyers to set up escrow accounts prior to closing. The lender uses this escrow account to store money to cover fees above and beyond your mortgage payments, such as property taxes, homeowners’ insurance, and HOA fees. You pay these extra fees right along with your mortgage payments each month. Your lender takes its share of your payment and then puts the rest into this escrow account.

Bills for your property taxes, insurance, and HOA fees should go directly to your lender, who then pays these fees right from your escrow account. In turn, you should receive a notice on your mortgage statements when each of these bills is paid. If you received a tax notice in the mail, something went wrong with this process. It’s critical to take immediate steps to resolve this issue.

It’s also important to understand this connection between your property taxes and your mortgage payment. In fact, knowing how an escrow account works can help you better compare mortgage rates when searching for a home and determining exactly how much you can afford to pay each month.

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What If You Learn Your Mortgage Servicer Didn’t Pay Your Taxes?

There are several reasons your mortgage servicer might not have paid your taxes, such as:

  • Clerical error. It’s not unheard of for local and state tax authorities, and even loan servicing companies, to make clerical errors that result in unpaid property taxes. For example, maybe the local tax authority sent the bill to your address instead of to the mortgage servicer.
  • Change in loan servicing company. Another common reason for unpaid property taxes is a change in loan servicing companies. It’s possible your lender sold your loan or changed mortgage servicers. In this case, your tax bill may have been sent to the old company rather than the new one.
  • Late mortgage payments. If you’re behind on your mortgage payments by more than 30 days, the lender isn’t required to pay your property taxes. However, if there’s still money in your escrow account, most lenders will make these payments.

If you find out your mortgage servicer didn’t pay your taxes, don’t assume anything. Instead, it’s crucial that you act fast. The first step is to contact all related parties.

Contact Your Lender

The first person you want to contact is your lender. Explain the situation and ask it to check on your escrow account immediately. In fact, you can request a copy of your escrow account activity at any time. In most cases, the lender will walk you through what steps you must take to resolve the issue.

However, if you’re not satisfied with the results of this call, you can file a dispute by sending a letter to your lender. In this letter, provide your name, contact information, account details, and a description of the error along with copies of your tax notice. Don’t send this letter with your standard mortgage payment. Instead, send it in a separate letter directly to your mortgage servicer.

Keep in mind that your lender is required by law to pay these fees out of your escrow account prior to the due date. Clerical errors do occur sometimes, so give your lender time to fix the error. Once you send a dispute letter, it only has 30 days to reply. However, it can state in writing that it needs an additional 15 days to investigate the issue.

Contact Your Tax Authority

You also want to contact your tax authority to discuss the issue. Even if you worked things out with the lender, you still want to update the tax authority on the status of your tax payments.

However, if your lender states that it didn’t receive your tax bill, you need to make sure the tax authority has the correct records. Start by explaining to the agency that your taxes are in escrow and your lender makes the payments. Then, have it check its records to make sure it has the right mortgage servicer listed.

If your lender states that it paid your taxes, ask the tax authority to recheck its records. If the agency’s records still show unpaid tax records, provide it with payment information from your lender and ask it to recheck. You may have to call your lender back if the agency is unable to find the payment.  

Contact an Attorney

If after sending a letter to your mortgage servicer or providing the tax authority with the necessary documentation you still haven’t resolved the issue, it may be time to seek legal assistance. Contacting a lawyer can help you learn more about your legal rights pertaining to escrow accounts. It’s likely your attorney can resolve the issue quickly or guide you through the next steps.

Stay on Top of Your Mortgage Payments

Unpaid taxes could result in a lien against your property, which can be difficult to remove. Unpaid taxes don’t directly impact your credit score. However, if you have to use your credit card or take out a personal loan to cover these costs, your credit score could drop.

The most important step is to follow through and make sure your taxes were paid in full. Ask for a full report of your escrow account where it shows payment. You also want to double-check with the tax authority to make sure your tax bill was paid.

If you’re in the market for a new home or considering refinancing your current home, you want to make sure your credit score is in good standing before applying for a new loan. Try Credit.com’s ExtraCredit program to build, guard, track, reward, and restore your credit. Sign up for ExtraCredit today.

Source: credit.com

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Apache is functioning normally

By the end of 2022, 27 million Americans had an outstanding personal loan balance with the average amount owed being $11,116. The interest rates of these loans are also the highest they’ve been since 2011 at 11.23 percent.

Sources: TransUnion and the St. Louis Federal Reserve

As of the second quarter in 2022, Americans owed over $192 billion in personal loans, according to TransUnion®.  This was a 31% increase from 2021 and is thought to be due to the financial hardships Americans experienced during the COVID pandemic that overwhelmed the nation in 2020.

If you’re one of the many Americans who took out a personal loan in early 2022, the good news is that interest rates were very low, according to the St. Louis Federal Reserve. Since then, rates have reached new highs, so many Americans are struggling to pay back these loans.

Understanding the current trends in personal loans can help you see where you stand financially. We’ve gathered 10 personal loan statistics that include the most common reasons people take out personal loans, delinquency rates and which states have the highest personal loan debt to help you make better financial decisions if you’re accumulating too much debt.

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Must-know Personal Loan Statistic Findings

Millions of Americans are taking out personal loans, and the following are some of the most interesting facts on the topic.

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  • 27 million Americans have personal loan debt (TransUnion)
  • At the end of 2022, the average new loan amount was $8,018 (TransUnion)
  • The average amount owed in personal loan debt was $11,116 at the end of 2022 (TransUnion)
  • In November of 2022, personal loan interest rates were the highest they’ve been since May of 2011 (St. Louis Federal Reserve Bank)
  • New Jersey has the highest average new personal loan account balance at $13,494 (TransUnion)

Average Personal Loan Debt in America

According to TransUnion, Americans owed roughly $9,896 on average as of the first quarter in 2022, the highest it’s been in recent years. Americans took out loans at an average of $6,656 per loan, which was over $1,000 more than in the previous quarter of 2022.

The amount owed per borrower dropped significantly between Q2 and Q3 in 2022, but by the end of the fourth quarter, the average amount owed increased by over 100 percent with the new loan amount dropping to $8,018.

The increase in personal loan debt may have been due to the inflation the country experienced in 2022. TransUnion also reports that there were more loans approved to “super prime borrowers,” or those with credit scores over 720, stating, “On a percentage basis, personal loan originations for subprime and near-prime borrowers increased in the single digits [year over year] whereas super prime borrowers experienced a 33% rise in the third quarter.”

How Many Americans Have Personal Loans?

The amount of Americans taking out personal loans increased 12 percent from 23.9 million in the first quarter of 2022 to 27 million by the fourth quarter.

Prior to the beginning of the COVID-19 pandemic, the total amount of personal loan borrowers was 23.3 million at the end of 2019 and dropped to 21.2 million by the end of 2020. The number of borrowers then grew back to 22.8 million in the following fourth quarter of 2021 and continued to grow as the pandemic regressed.

Quarter

Q4 2022 Average new account balance

Q4 2019

23.3 million

Q4 2020

21.2 million

Q4 2021

22.8 million

Q4 2022

27 million

The Most Common Reasons to Take Out a Personal Loan

LendingTree conducted a survey of their users in 2022 and found that the most common reason consumers took out personal loans was to pay down other debts. Over 58 percent of borrowers used these loans to pay down debt, and the other main reasons included credit card refinancing, home improvements and other major purchases.

Rank

Reason

Percentage of respondents

1

Debt consolidation

41%

2

Other

17.3%

3

Credit card refinance

17.3%

4

Home improvements

6.2%

5

Major purchase

4.1%

6

Medical expenses

3.0%

7

Moving/relocation

2.9%

8

Everyday bills

2.9%

9

Car financing

1.7%

10

Car repair

1.1%

11

Business

0.9%

12

Vacation

0.5%

13

Homebuying

0.4%

14

Wedding expenses

0.4%

Average Personal Loan Interest Rates

During the second quarter of 2022, the Federal Reserve Bank of St. Louis reported that interest rates reached an all-time low of 8.73 percent. By the end of the year, these rates were the highest they’ve been since 2011 at over 11.2 percent.

Personal Loan Debt Compared to Other Debts

Based on TransUnion data, personal loans account for less than four percent of the total number of accounts when compared to other types of loans, such as credit cards, home and auto loans.

Account type

Number of accounts

Percentage of accounts

Credit card

518.4 million

76.3%

Auto loan

81.2 million

11.9%

Mortgage loan

52.6 million

7.83%

Personal loan

27 million

3.97%

It’s also important to note that not all credit card accounts carry a balance.

Personal Loan Delinquency Rates

Delinquent accounts are accounts 60 days or more past due and can hurt your credit score. The Q4 TransUnion report shows that the delinquency rate dropped year over year between 2019 and 2020, but was up 53 percent as of 2022, with an overall delinquency rate of 4.14 percent.

Quarter

Delinquency rate

Q4 2019

3.48%

Q4 2020

2.7%

Q4 2021

3%

Q4 2022

4.14%

TransUnion’s 2022 Credit Snapshot shows that in the last month of the report, those with the lowest credit scores have the highest delinquency rate of 23.9 percent, while super prime borrowers are only at 12 percent.

Credit score range

Percentage of delinquent borrowers

Subprime (300 to 600)

23.9%

Near prime (601 to 660)

23.7%

Prime (661 to 720)

23.3%

Prime plus (721 to 780)

17%

Super prime (781 to 850)

12%

Personal Loan Statistics by State

TransUnion’s 2022 Credit Snapshot reports that New Jersey has the highest average new account balance at over $13,000, and Oklahoma has the lowest at $3,170. Although Oklahoma has the lowest new account balance, they have the highest delinquency rate at 7.73 percent.

State

Q4 2022 Average new account balance

Q4 2022 Delinquency rate

AK

$10,296

2.9%

AL

$4,362

6.59%

AR

$7,089

5.18%

AZ

$9,343

3.78%

CA

$10,454

3.47%

CO

$12,322

2.03%

CT

$11,712

2.57%

D.C.

$9,016

6.55%

DE

$9,146

4.04%

FL

$8,379

3.94%

GA

$8,621

5.18%

HI

$12,224

2.28%

IA

$7,443

2.94%

ID

$9,072

4.38%

IL

$9,236

3.46%

IN

$7,439

2.97%

KS

$8,349

3.05%

KY

$6,875

3.36%

LA

$6,797

5.07%

MA

$12,518

2.24%

MD

$10,956

2.77%

ME

$6,651

1.67%

MI

$7,052

3.21%

MN

$10,692

3.73%

MO

$6,522

6.69%

MS

$5,179

4.96%

MT

$9,326

2.53%

NC

$10,035

3.03%

ND

$8,051

1.89%

NE

$7,755

3.65%

NH

$11,719

2.31%

NJ

$13,494

3.49%

NM

$5,418

6.31%

NV

$8,839

3.74%

NY

$11,843

2.77%

OH

$7,595

3.75%

OK

$3,170

7.73%

OR

$10,523

2.93%

PA

$10,418

3.06%

RI

$8,744

2.14%

SC

$5,924

4.89%

SD

$9,945

2.06%

TN

$5,355

5.38%

TX

$4,952

6.33%

UT

$7,966

4.23%

VA

$9,875

3.37%

VT

$6,180

0.82%

WA

$9,570

2.94%

WI

$6,489

3.95%

WV

$10,864

1.96%

WY

$7,698

2.66%

Personal Loan Statistics by Type of Lender

More and more Americans are turning to financial technology companies, also known as FinTech, for their personal loans. These are online banking services that are done via a company’s website or mobile app, and 32.9 percent of all personal loans are done through these types of companies.

Lender type

Distribution of total balances

FinTech

32.9%

Banks

20.5%

Credit unions

19.7%

Other finance companies

26.9%

Can Personal Loan Debt Affect Your Credit Score?

If you’re one of the 27 million Americans with a personal loan, you don’t have to let your debt harm your credit score. As you’ve learned from these personal loan statistics, many Americans have turned to personal loans to pay off other debts, but many people are delinquent with their payments, which can hurt their scores.

Credit.com provides a variety of credit tools and tips to help you work to repair and improve your credit. You can learn more about our services, like ExtraCredit, or click here to get your free credit report card.

Source: credit.com

Apache is functioning normally

Apache is functioning normally

Are you struggling to meet your monthly mortgage payments? If so, you’re not alone. Between the impact of COVID-19 and fluctuating inflation concerns, many homeowners are struggling to meet their financial obligations. In fact, records show a 115% increase in the number of home foreclosures in the United States from 2021 to 2022. Unfortunately, many homeowners don’t realize there are various programs available to help them avoid losing their homes. This article covers the home affordability programs offered that may be able to help you avoid foreclosure or lower your monthly mortgage payments.

In This Piece

Finding Mortgage Relief Options

During the pandemic, the government created numerous home loan programs. These programs can help individuals and families overcome financial hardships. Each program has different eligibility requirements, but the home must be your primary residence. Many of these programs are also for homeowners with federally backed mortgages, such as VA, USDA, or FHA loans.

Most of these programs are for people who already have a home and have concerns about paying their mortgage. Those looking to buy their first home may wonder, “How do I know if I can afford a home?” The first step is to conduct a free credit check to find out what your credit score is.

How Can I Save My Home From Foreclosure?

The government has several foreclosure assistance programs to help you avoid losing your home. These government programs may be able to pay a portion of your overdue mortgage payments or pause these payments until you’re back on your feet.

It’s important to explore all your options to determine how these programs can help. You can start by contacting your lender to see what options they have available. 

Homeowner Assistance Fund (HAF) Program

As part of the American Rescue Plan Act of 2021, the Homeowner Assistance Fund (HAF) Program helps eligible homeowners impacted by COVID-19 avoid foreclosure. This program can give homeowners money to make past-due mortgage payments and other related costs, such as property taxes, homeowners insurance, home repairs and utility bills. The goal is to ensure homeowners financially impacted by the global pandemic don’t lose their homes.

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While the distribution of these funds began in 2021, many states still have funds available. To be eligible for the HAF Program, homeowners must earn less than 100% of the median income of the United States or less than 150% of the median income for their specific area (whichever is higher).

You can check your income eligibility with the U.S. Department of Housing and Urban Development. In most cases, homeowners aren’t expected to repay these funds. However, you are expected to continue making on-time payments. 

This program is only for those who already own a home. If you’re considering purchasing a home, you want to make sure you have enough money in savings. How much money you need to buy a house depends on various factors, such as your down payment and closing costs.

CARES Act

The Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted to provide economic assistance to individuals and families affected by the pandemic. For eligible homeowners, this act gives them the ability to request forbearance from their mortgage servicer or lender. A forbearance enables homeowners impacted by COVID-19 to pause or reduce their regular mortgage payments for a set period of time.

With the CARES Act, you can request an initial forbearance of up to 180 days. If necessary, you can also request an extension of up to 180 days. The maximum forbearance amount is 360 days.

You’ll need to make up these missed payments—but not in one lump sum. Most lenders allow borrowers to pay this back in installments or to defer these payments to the end of the loan. However, it’s important to understand your obligations prior to entering into a forbearance agreement.

Under the CARES Act, only homeowners with federally backed loans, such as Fannie Mae, Freddie Mac, USDA, VA and USDA loans, are eligible for guaranteed forbearance. Homeowners with private loans should check with their mortgage servicer or lender to see if forbearance is available.

The CARES Act program is ideal for homeowners who are struggling to make their monthly mortgage payments. To be eligible for this program, the global pandemic must have financially impacted you. However, no documentation is required to prove this impact. 

To see if you qualify, reach out to your specific mortgage servicer or lender. You should find this contact information on your latest mortgage statement.

Refinance with Your Lender

Refinancing is another option homeowners should consider. Depending on the specifics of your current home mortgage, you may be able to obtain lower monthly payments. Fortunately, the recent housing boom has significantly increased home values for many people. This means homeowners may qualify for refinancing after just a few years of homeownership.

Homeowners with an FHA, a VA, a USDA or another federally backed loan may qualify for a Streamline Refinance process. With this process, eligible homeowners can refinance their home mortgage without a credit check or proof of employment. In fact, with a Streamline Refinance, you may not even need to go through the appraisal process. This means you may be able to refinance your home even if you have little or no equity.

Even if you have a private loan, you may be able to refinance your home loan to lower your monthly payments. If you’re not able to refinance your current home loan, you may be able to request a loan modification. For example, you may be able to change the terms, interest rates or structure of your current mortgage. 

When seeking a new home mortgage, it’s important to understand how credit works when buying a house. Before you start the process, you should request a free credit score.

What Other Options Do I Have?

If you’re struggling to make your monthly mortgage payments or looking for a way to lower your monthly payments, compare your home affordability options. Be sure to talk to your mortgage servicer or lender to see what options are available.If you’re considering refinancing your current mortgage, be sure to compare various lenders. Compare current mortgage rates now.

Source: credit.com

Apache is functioning normally

Apache is functioning normally

Buying a used car can lower the cost of your purchase, letting you move into car ownership with a much smaller loan. This might also be beneficial if you don’t have the credit or income to qualify for a loan amount that would cover a new car price. You might get an even better deal if you buy a used car through a private seller. However, it’s important to ensure you’re protected from scams and engaging in a safe transaction. 

This piece covers how to buy a used car from a private seller. That includes how to get a loan for a used car from a private seller. 

In This Piece

How to Buy a Car from a Private Seller

When you’re buying a car from a private seller, there are some additional concerns you may not have when buying a vehicle from a dealership. Private sellers don’t have consumer reviews and brand reputation you can consider. So, you have to do some legwork to ensure you’re getting a good deal and aren’t getting scammed. Follow the steps below to buy a car from a private seller.  

Shop Around for Local Deals

Start by understanding what you can afford. If you want to know how to finance a private car sale, start by getting an auto loan first. You can apply for auto loans online or with a local bank. Once you get pre-approved, you know how much used car you can afford. 

Not sure if you can get approved for a car loan? Get your credit score first to see your odds of being approved and work toward improving your scores before moving forward with your purchase.

Privacy Policy

Use your loan pre-approval or cash on hand to set a budget for your car purchase. Avoid going outside that budget so you don’t have a financial hardship once you buy the used car.

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Start researching cars that fit your needs. Read about cars you’re interested in online, and look into different considerations for older models. This helps you know what type of common issues to look for when you start checking out cars from private sellers.

Next, review the cars available from private sellers in your area. You can research options on Facebook marketplace, Auto Trader, eBay and any local classified publications, such as your city’s newspaper.

Contact the Seller

Once you spot a potential new-to-you ride, start by making contact with the seller. Take some time to feel them out and ensure they’re legitimate. Avoid meeting anyone by yourself or in a location you’re not comfortable with. If the seller is willing to come to a public location with the vehicle, that’s best. If not, take someone with you when you go to their home.

Ask to test-drive the vehicle. If you can have a mechanic or someone you trust who knows a lot about cars look over the vehicle, do so. You can also look up the CARFAX report on the vehicle using its VIN. This database and others like it provide some information about the vehicle’s history, including potential accidents, service records and how many owners the vehicle might have had.

Once you’re confident you’ve found the vehicle for you, start negotiations. 

Complete the Sale

Once you and the private seller agree on a price for the vehicle, move forward with the transaction. Make sure you get any agreement in writing to protect yourself in the future. You may also want to pay by check so you have a paper trail demonstrating that money changed hands for the car.

Verify ownership documents when you complete the sale. If the individual has the title on hand, they should sign it over to you at that time. If the seller owes money on the car, there’s a lien on the title. You’ll need a bill of sale indicating you paid for the vehicle. The owner will then take your money to their bank to pay off the car so they can get a title to transfer to you.

Complete the Paperwork

Even if you go through a private seller and not a dealership, buying a car requires lots of paperwork. You’ll need to:

  • Ensure you have a receipt or bill of sale documenting the purchase
  • Get the title from the seller at the time of purchase or after the fact
  • Go to the DMV with the title and ask for a transfer of ownership, which includes the completion of a form and getting a new title
  • At the DMV, you may need to pay tax, title and registration
  • Depending on your state, you may have to pay sales tax on the vehicle purchase 

Bottom Line

Always have a plan when you’re making large purchases. Create a budget and stick to it to avoid overcommitting yourself financially. Do the research to protect yourself from scammers. If a deal seems too good to be true, it may be.

If you need a loan to buy a used car from a private seller, start by comparing auto loan rates. Then, you can prepare yourself with everything you need to help finance your new car.

More Money-Saving Reads:

Article updated. Originally published July 15h, 2015.

Source: credit.com

Apache is functioning normally

Apache is functioning normally

A FAFSA is an application for financial aid that determines your eligibility. This application will not appear on your credit report, and does not affect your credit score.

Congratulations on your high school graduation! You put in a lot of hard work to get that degree, and you deserve to celebrate. This might be your last summer of “freedom,” but that doesn’t mean you don’t have any responsibilities to take care of.

If you haven’t submitted the FAFSA—a crucial step toward receiving financial aid or taking out student loans—now is the time to buckle down and get to work. Even if you don’t think you’ll qualify for financial aid, we recommend getting familiar with the FAFSA, understanding its potential impacts on your credit score and financial future, and submitting an application.

Here’s what we’ll cover in this piece:

What Is the FAFSA?

FAFSA stands for Free Application for Federal Student Aid. It’s a one-stop application for all federal student loans, grants, work-study opportunities, and other financial aid sponsored by the US government. In order to qualify for federal financial aid, you must fill out a FAFSA.

Filling out a FAFSA is free, and the federal government provides more than $112 billion in FAFSA funds each year. States and other aid organizations may require you to fill out a FAFSA as part of their loan, scholarship, or grant applications as well.

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Does the FAFSA Affect Your Credit Score?

The FAFSA is just an application for financial aid, which means it won’t affect your credit scores. You complete it to find out what type of financial aid you might be eligible for. The fact that you completed the FAFSA never shows up on your credit report—it’s not considered a credit inquiry—so it can’t impact your credit score.

Does Financial Aid Show Up on Your Credit Report? 

The results of your FAFSA could impact your score depending on how you handle them. Financial aid that you don’t have to pay back, such as scholarship or grant money, doesn’t hit your credit report. It’s not debt, so there’s no reason for it to. But student loans can show up on your credit report.

Student loans, whether you qualified for them via the FAFSA or took out private student loans, are a form of debt. They may be reported to the credit bureaus. Paying those loans on time and as agreed could help improve your credit—and this is one way you can start building credit.

Missing payments or defaulting on student loans can hurt your credit. In this way, the outcome of the FAFSA could have an impact on your credit score.

Who Can Complete the FAFSA?

Anyone who is planning to attend a college or university in the next academic year can complete the FAFSA to find out what they qualify for. Completing the application isn’t a guarantee of any financial aid and it doesn’t create an obligation on your part—other than to tell the truth on the form. You may want to complete it each year to see what you qualify for.

Parents of dependent students can also complete the FAFSA. In these cases, it would be the parental household income that would be considered in determining what someone is eligible for.

The federal government does not consider credit scores or credit history when determining what someone is eligible for. The financial aid is decided mainly on financial need and income. You do have to meet some other requirements, such as having a valid Social Security number.

When Should You Complete the FAFSA?

The deadline for the FAFSA differs for each academic year, however, many schools have their own deadlines, as do states. They may process some financial aid based in part on the FAFSA. A good rule of thumb would be to complete the application as soon after October 1 as possible, to ensure you’re early enough to be eligible for the highest number of opportunities.

What Do You Need to Complete the FAFSA? 

First, you have to create an FSA account. This is the account you use to complete the FAFSA, review any requests for additional information, and see what student aid you might be eligible for. Once you have an account, you will need the following to complete the application:

  • Your Social Security number and driver’s license number
  • Tax records for you and your parent for the qualifying year—typically it’s two years before the academic year in question
  • Any records of untaxed income and assets
  • A list of all the schools you want to apply to, as you’ll have to add them to the FAFSA

Can You Modify a FAFSA?

If you make a mistake or information changes, you can modify the FAFSA. If your income situation has changed drastically and is not well reflected by the tax return required by this year’s FAFSA, you can speak to the financial aid office at the school you’re attending or applied to. Those offices sometimes have options for addressing this issue.

Do You Have to Pay Back FAFSA Money?

Whether or not you have to pay back FAFSA money depends on the type of aid you receive. Certain need-based grants don’t have to be paid back. Student loans do.

What if You Don’t Qualify for FAFSA Money?

Federal student aid isn’t the only way to pay for college. For some, private student loans can be an option. Check out the student loan marketplace at Credit.com to see some of your options. And if you get some FAFSA money but it’s not enough to cover all your college expenses, you might consider applying for a college student credit card. Use it responsibly to help build your credit as you go through school.

Revvi Visa® Credit Card

  • Earn 1% Cash Back Rewards on All Purchases with Revvi!
  • The Perfect Card for Not-So-Perfect Credit
  • If approved, pay the $95 Program Fee to open your account
  • Fast and easy application process with a response provided in seconds!
  • Reports to All Three Major Bureaus to Build Your Credit History
  • Eligible for a Credit Line Increase after 12 months of on-time payments!
  • Choose between 2 free card designs and 4 Premium designs
  • Accepted by Merchants Across US & Online
  • Free Credit Monitoring Powered by TransUnion
  • Simple, Powerful Mobile App

Source: credit.com

Apache is functioning normally

Apache is functioning normally

The Fannie Mae Flex Modification Program (FMP) is a mortgage assistance solution designed to relieve borrowers facing financial hardship.

Are you looking to improve your mortgage management but don’t know where to start? Handling mortgage payments is challenging, especially if you’re facing economic difficulties and don’t know where or how to get financial assistance. The Fannie Mae and Freddie Mac Flex Modification Program may be the solution you’re looking for.

Learn what you need to know about the Flex Modification Program: how it works, who qualifies for it, and how you can apply. This comprehensive guide will help you understand the many benefits of FMP for a more stable financial future.

In This Piece:

What Is the Flex Modification Program?

The Fannie Mae Flex Modification program is a mortgage assistance solution designed to relieve borrowers facing financial hardship. This program offers a flexible framework for loans that helps eligible borrowers to modify their monthly mortgage payments and avoid foreclosure.

Modifying the loan terms can make mortgage payments more affordable and sustainable for struggling homeowners.

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How Do Fannie Mae and Freddie Mac Work?

The mortgage market has a few essential entities, including the government-sponsored enterprises called Fannie Mae and Freddie Mac. Their approach allows lenders to free up funds to provide more mortgage loans to borrowers.

But how does it work? Fannie Mae and Freddie Mac helped make mortgages more accessible by buying them from lenders. This allows lenders to have more money available to provide new mortgages to borrowers or invest in other financial opportunities. For example, if a lender originates a mortgage, they can sell it to Fannie Mae or Freddie Mac, who then include it in their portfolio or package it into mortgage-backed securities.

How Flex Modification Works

The Flex Modification Program offers loan modifications to eligible borrowers experiencing financial hardship. Here’s a breakdown of how the program operates:

Eligibility Requirements:

  • You must have a mortgage loan owned or guaranteed by Fannie Mae or Freddie Mac.
  • The mortgage loan must be at least 60 days delinquent or at risk of imminent default.
  • You must demonstrate a hardship that affects your ability to make timely mortgage payments.

Modification Terms:

  • The program aims to reduce your monthly mortgage payment to 20% or more below your pre-modification.
  • The modification may involve adjusting the interest rate, extending the loan term, or forbearing a principal portion.
  • The goal is to make the mortgage payment more affordable while ensuring it’s sustainable for you.

Application Process:

  • Apply to the Flex Modification Program through a loan servicer.
  • The loan servicer will assess your eligibility and collect the necessary documentation.
  • Once approved, the loan servicer will work with you to finalize the modification terms.

Why Should You Consider the Flex Modification Program?

Before considering the Flex Modification Program, it’s essential to understand its potential pros and cons.

Pros:

  • Lower monthly payments: The program aims to reduce your mortgage payment to a more affordable level, making it easier to manage your finances on time.
  • Protection from foreclosure: By modifying your loan, the program can help you avoid the devastating consequences of foreclosure.
  • Improved financial stability: By participating in the Flex Modification Program, you can regain control of your financial situation. Providing you with a sense of stability and peace of mind, allowing you to focus on rebuilding your financial health.
  • Simplified application process: Applying for the program is relatively straightforward, and you can work directly with your loan servicer to navigate the process.
  • Potential principal reduction: The FMP may offer this, which means that a portion of the outstanding loan balance could be forgiven or deferred, reducing the overall amount owed. This can be particularly beneficial if you owe more on the mortgage than your current property value.
  • Preservation of homeownership: One of the primary goals of the FMP is to help borrowers preserve their homeownership. The program offers a viable alternative to foreclosure by providing a framework for loan modifications.

Cons:

  • Extended loan term: Modifying your loan may result in a more extended repayment period, meaning you’ll make mortgage payments for longer.
  • Impact on credit score: While participating in the program doesn’t directly affect your credit score, the delinquency prior to modification might be reported on your credit report.
  • Limited availability: The program is specifically for Fannie Mae or Freddie Mac borrowers with owned or guaranteed loans. You won’t qualify for this program if either entity doesn’t back your loan. However, other programs may exist. Contact your lender if you’re struggling to make your mortgage payments.

Remember, these pros and cons will vary based on your circumstances. It’s essential to consult with your loan servicer and thoroughly review the modification terms to understand the potential benefits you may receive from participating in the program.

Who Qualifies for the Flex Modification Program?

The Flex Modification Program is designed for borrowers struggling with mortgage payments due to financial hardship.

To qualify for the program, you must meet the following criteria:

  • Loan ownership: The mortgage loan must be owned or guaranteed by Fannie Mae or Freddie Mac.
  • Delinquency or imminent default: Borrowers must be at least 60 days delinquent on their mortgage payments or at risk of imminent default.
  • Demonstrated hardship: Borrowers need to demonstrate a hardship that affects their ability to make timely mortgage payments. Hardships may include job loss, income reduction, medical expenses, divorce, or other significant life events.

Additionally, you must comprehend what a “hardship” entails to be considered for a loan modification. Each situation is evaluated individually, but common examples of hardships include loss of income, disability, serious illness, divorce, or the death of a co-borrower.

How to Apply for the FMP

If you believe you meet the eligibility requirements for the Flex Modification Program, you can follow these steps and tips to apply:

  1. Gather documentation: Prepare the necessary documents, such as proof of income, bank statements, tax returns, and any other documentation required by your loan servicer.
  2. Contact your loan servicer: Inform your loan servicer about your interest in the Flex Modification Program.
  3. Complete application forms: Your loan servicer will provide the necessary forms and guidance to complete the application process.
  4. Submit documentation: Submit all the required documentation and the completed application forms to your loan servicer.
  5. Follow up and provide additional information: Be proactive in promptly following up with your loan servicer and providing any additional information they request.
  6. Review and accept the modification terms: Once your loan servicer evaluates your application, they will provide you with the proposed modification terms. Review them carefully and, if acceptable, sign and return the necessary paperwork to proceed with the modification.

Remember, each loan servicer may have a specific application process, so it’s crucial to communicate directly with them to ensure you have all the necessary information and are following the correct steps. Having to redo the application process due to easily-avoided mistakes is the last thing you need.

Other Mortgage Payment Help Options

What if I don’t qualify? What can I do? Other mortgage payment assistance options are available if the FMP is not the right fit.

Fannie Mae and Freddie Mac offer additional programs catering to different circumstances. Some of these options include:

  • Home Affordable Modification Program (HAMP): This aims to help homebuyers struggling with financial hardship and mortgage payments.
  • Repayment plan: Allows you to catch up on missed mortgage payments by adding a portion of the past-due amount to your regular expenditures over an agreed-upon period.
  • Forbearance: Temporarily suspends or reduces your mortgage payments with this program. It can be for a specific period, providing short-term relief during financial difficulties, so you can reassess the situation.

But before you move forward with one of these, it’s essential to analyze your alternatives and consult with your loan servicer to determine the best course of action based on your specific circumstances.

FAQs

Let’s address some frequently asked questions about the Flex Modification Program:

Does the Flex Modification Program Affect Your Credit Score?

Participating in the Flex Modification Program doesn’t directly impact your credit score. However, the delinquency prior to modification might be reported on your credit report

What if Fannie Mae or Freddie Mac Doesn’t Own My Loan?

If your loan isn’t owned or guaranteed by Fannie Mae or Freddie Mac, you won’t be eligible for the Flex Modification Program. However, you should contact your loan servicer to inquire about other available mortgage assistance options or loan modification programs specific to your loan type.

How Long Does the Flex Modification Program Last?

The duration of the Flex Modification Program varies depending on the specific terms of the modification. Typically, the program aims to provide long-term mortgage relief by modifying the loan terms to make payments more affordable and sustainable for the borrower.

The revised terms may involve extending the loan term or adjusting the interest rate. It’s important to discuss the duration of the modification with your loan servicer, as it will depend on your circumstances and the terms agreed upon.

Can I Qualify for the Flex Modification Program if I’ve Previously Received a Loan Modification?

If you have previously received a loan modification, you may still be eligible for the Flex Modification Program. However, the specific requirements and eligibility criteria may change depending on your previous modification and the current guidelines set by Fannie Mae and Freddie Mac.

It’s crucial to communicate with your loan servicer and provide them with all the necessary information regarding your previous modification. They will assess your eligibility based on your unique circumstances and guide you through the application process.

Remember, these answers are general guidelines, and you must consult with your loan servicer to get accurate and personalized information based on your situation.

What Are the Next Steps?

The Fannie Mae Flex Modification Program provides borrowers with a potential lifeline during financial hardship. It aims to make mortgage payments more manageable and sustainable by offering loan modifications. If you’re facing challenges with your mortgage payments, exploring the Flex Modification Program and other mortgage payment help options can help you find the assistance you need.

To take control of your mortgage management and improve your financial well-being. Consult with your loan servicer for accurate and personalized information based on your situation, and research different mortgage rates to make informed financial decisions.

Source: credit.com