Alternatives

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After shopping for a home warranty for a few days, you may wonder how warranty providers stay in business.

Based on online reviews, you’d think every customer who’s ever bought a warranty had a terrible experience and feels cheated. Reviewers warn potential customers away as if they’re patrolling some kind of abyss.

Naturally, online reviews can’t represent all customers. Still, the high volume of discontent is alarming.

The Home Service Club, a relatively new warranty provider, stands out as an exception.

The Home Service Club Review: Top Highlights

The Home Service Club opened in 2008 with the goal of simplifying home warranties and providing a more straightforward approach to coverage and caps. So far, based on customer reviews, the company has succeeded.

You can find less expensive premiums and higher spending caps in other companies’ contracts, but you learn the real cost of a warranty when it doesn’t pay for your repair and you have to find some other way to cover the expense.

With The Home Service Club, you’ll have a more reliable way to know when the warranty will pay and when you’ve exceeded its limits.

Read on to see why the Home Service Club is one of our top home warranty providers.

The Home Service Club Coverage

The Home Service Club has two base levels of service, Standard and Comprehensive.

Standard Plan

Essentially, the Standard Plan covers the kitchen and laundry area and the primary systems in your home:

  • Refrigerator
  • Stove (ovens, ranges, cooktops)
  • Dishwasher
  • Clothes washer and dryer
  • Icemaker (freestanding)
  • Built-in microwave
  • Trash compactor
  • Built-in food prep center (processors, etc.)
  • HVAC system units
  • Electrical system
  • Water heater
  • Plumbing
  • Garbage disposal
  • Garage door opener
  • Ceiling fans
  • Central vacuum

Comprehensive Plan 

The Comprehensive Plan includes items in the Basic Plan, plus the following:

  • Plumbing stoppages
  • Ductwork
  • Pest control
  • Gas leaks
  • Telephone wiring
  • Smoke detectors
  • Alarm system wiring
  • Attic fans
  • Exhaust fans
  • Sump pumps
  • Doorbells
  • Hot / cold water dispensers
  • Hot water pump

Additional Services

After you’ve purchased a Basic or Comprehensive warranty from The Home Service Club and waited the required 30 days for the contract to go into effect, you can add on services for an extra annual fee.

Optional coverage include protection for your:

  • Sprinkler system
  • Freestanding freezer
  • Additional refrigerators
  • Sub-zero freezers
  • Well pump
  • Water softener
  • Jetted bathtub
  • Roof
  • Pool and spa
  • Sewage ejector pump
  • Outside water or power lines (running to an exterior building, for example)

How Much the Home Service Club Costs

Payments 

Home repair costs vary in different parts of the country, so The Home Service Club also varies its fee structures in different markets.

The following prices could be different depending on your location:

  • Premiums: The Basic Plan costs around $500 a year in most areas. The Comprehensive Plan will cost closer to $750 a year. You can break these annual fees down into monthly payments. To get a precise quote customized to your property, you’ll have to enter some contact information on the company’s site.
  • Fees: Like any home warranty, The Home Service Club will charge an initial service fee to send a technician. The fee could be $65, $95, or $125 depending on your contract. 

The Home Service Club explicitly states in its sample contract what it will and will not repair, along with the spending caps for a one-year term.

Annual caps

 Many of the caps are lower than some other warranties, although it can be hard to know for sure since so many warranty contracts are hard to decipher.

Here’s a sample of The Home Service Club’s annual caps:

  • Heating system: $2,500
  • Air conditioner: $2,500
  • Ductwork: $750
  • Water heater: $500
  • Electrical system: $500
  • Built-in microwave: $500
  • Refrigerators: $750
  • Garbage disposal: $350
  • Clothes dryer: $800
  • Icemaker: $400

Additionally, and this is important, the warranty will place a comprehensive cap between $6,000 and $9,000 per year on repairs at your home. If you exceed your annual comprehensive cap, you’re no longer eligible for any service on any system.

  • The Basic Plan usually caps annual payouts at $6,000.
  • The Comprehensive Plan usually caps annual payouts at $9,000.

The Home Service Club Claims Process

When a covered system in your home needs a repair or replacement (and you’ve waited 30 days after signing the contract) you can contact The Home Service Club to file a claim.

How to File a Claim

The company offers 24-hour coverage, but only online. If you want to phone in a request, you’ll need to call during business hours in the Eastern time zone.

The company also limits coverage on weekends and holidays, even online, so expect to wait longer — up to 48 hours — for a response. Ordinarily, the company does its best to get help to your home within 12 hours.

Who Will Fix My System?

The Home Service Club has a network of about 15,000 contractors and technicians, and the company’s dispatchers will decide which specialist to send to your home. As a customer, you have no control over the process.

This in-network requirement is not unusual for a warranty, and most customers find it preferable to the other alternative: paying for a repair out of pocket from a local contractor and then trying to get reimbursement from the warranty.

What’s Required of Me?

Other than paying the premiums and the service fees — and staying within the annual caps on expenses — you’ll have a couple of other responsibilities:

  • Inspections and local codes: If your municipality requires an inspection of a repaired or replaced system, you’ll have to cover any associated costs. The warranty will not pay it. (Many municipalities do not charge for inspections.)
  • Regular maintenance: The Home Service Club does not require a pre-inspection of your home’s systems before you sign a contract, but it will not pay to repair systems damaged by a lack of regular maintenance. If you haven’t changed your air conditioner filter in, say, 18 months and this causes a breakdown, your warranty can refuse to cover the expense.

Also, you’ll need to be home, or arrange for someone else who is 18 or older, to be at your home during the repair process.

Canceling the Contract

You can cancel your warranty within the first 30 days at no charge except for an administrative fee up to $45. You can also cancel the contract anytime after the first 30 days, but you will not receive a full refund on premiums paid.

Your refund will be prorated depending on how much time has passed since you entered the contract.

The Home Service Club retains the right to cancel your contract if you don’t pay the premiums, of course. The company can also cancel your contract if you threaten service technicians or customer service reps or if the local laws in your area change in a way that makes service more expensive.

Transferring the contract: If you sell your home, you can arrange uninterrupted coverage for the buyer, but you’ll need to do so in advance. Warranties can be appealing selling points in the real estate market.

Alternatives to the Home Service Club

As you shop for a home warranty, be sure to consider some of the top alternatives to the Home Service Club below.

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Who Needs a Home Warranty?

Hundreds of thousands of homeowners opt for home warranties each year because they worry about how they’d afford a major home repair.

When you buy a new car or a new iMac, your warranty can almost guarantee your product will be repaired or replaced during the warranty’s period. 

A home warranty can’t offer this kind of guarantee because the company didn’t make the products it agrees to protect. A better term for a home warranty may be “service contract.”

When you pay your premiums, you’re pooling your resources with thousands of other customers to shield yourself against unexpected home repair costs and service bills.

When Not to Buy a Home Warranty

If you don’t need this kind of shield, a warranty won’t make as much sense for you. For example, you may not need a home warranty if:

  • You could set aside money: Unexpected repairs could cost thousands of dollars, and you may need the money quickly, especially if your air conditioner needs to be replaced and it’s the middle of July. If you have a healthy emergency fund set up, you won’t need to rely so much on a warranty.
  • You could borrow money at low interest: Banks and other lenders, and even some contractors, offer low or no-interest borrowing promotions if you need a large repair and don’t have the cash. This option won’t work unless you have good credit, though. And stay away from this idea if you can’t repay the loan within the promotional interest-free period.
  • You could fix a lot of things yourself: If you are a contractor or if you’re experienced at repairing a wide variety of home systems, you may be your own warranty, though it’s still smart to set aside money for parts and new components.
  • Your house is brand new: New homes can have problems, too, but you may be less worried about replacing entire systems in a newer home. Also, many new systems in a home may already have their own manufacturer’s warranties.

When to Buy a Home Warranty

The best candidates for a home warranty such as The Home Service Club often include people who:

  • Have an older home: You can cross your fingers all day, but a 25-year-old HVAC system or a 15-year-old refrigerator may not last much longer. If you’ve bought an older home with older systems, a warranty could save you thousands of dollars on repairs.
  • Have limited financial flexibility: Sure, you’ll pay $500 or so a year in premiums with The Home Service Club, but the warranty could save you up to $6,000 if a lot of stuff went wrong at your home this year.
  • Wants a one-call solution: Some people just don’t have the time or energy to find quality contractors for expensive repairs. A warranty such as The Home Service Club’s plans offer convenience because you can call one number for most of your repair needs.

Is The Home Service Club Right for You?

Only you can decide whether The Home Service Club would be worthwhile for your home.

I will say this: I like the clarity of The Home Service Club when compared to other companies.

Premiums and fees may be higher than some other companies’ plans, and annual payout caps may also be lower with The Home Service Club in comparison to other contracts.

But with The Home Service Club, you have a pretty clear expectation for what you’re getting in return for those costs.

Too many warranties claim to offer instant service and complete coverage, all of which sounds great. Only later do customers learn about the warranty’s exclusions and limitations.

Studying the Contract Reduces Your Risk

Home warranties pitch the concept of “peace of mind” to customers who worry about excessive home repair costs. This is an abstract concept.

You need some concrete facts before signing a contract.

Fortunately, you can see a sample contract from The Home Service Club before you even share your email address or phone number with the company. Read the contract carefully to learn about its limitations.

Before signing, though, read over the actual contract you’ll be agreeing to because it could work a little differently from the sample contract.

A Warranty Isn’t a Long-Term Commitment

Unlike homeowners insurance, which you should always have in force to protect your property from external damage, a home warranty is an option. Most warranties, including The Home Service Club’s plans, work on annual contracts.

Someone who needs a warranty now but may not need it next year or in a few years can simply opt not to renew the contract.

Remember, too, that you’re not locking in a premium or fees for more than one year at a time. Next year the company could increase your premiums or raise service fees.

Bottom Line: Consider Your Options and Study the Fine Print

Warranties incite customer anger for one reason: when the peace of mind the warranty promises turns out to be a false sense of security.

Avoid this snare by reading any contract carefully before signing. Whether it’s the Home Service Club’s contract or another warranty company’s plan, it’ll be worth your time and money to understand each limitation of the contract.

Read it line by line. Make an evening of it after dinner.

Read it aloud if you need help staying awake.

This way you can find out exactly how the contract builds its promise to shield you from unexpected home repair expenses.

Source: goodfinancialcents.com

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Regardless of your age or your employment status, life insurance can be an integral part of your overall financial planning. Why? The proceeds that are received from life insurance, which beneficiaries can obtain free of income taxes, can be used for a multitude of purposes:  the payoff of debts, the supplementing of income for ongoing expenses, or for ensuring that other promises are kept, such as paying for the future college education of a child or a grandchild.

When you are in the process of purchasing life insurance, there are several things to keep in mind. These include making sure that you have the proper type and amount of insurance coverage. It is also essential that you review the carrier you are considering purchasing your coverage through, to determine whether it is secure and stable financially. 

The History of Guarantee Trust Life Insurance Company

Guarantee Trust Life has been in the business of offering its products and services to individuals, families, and businesses for more than 80 years. During that time, the company has grown and expanded.

Today, Guarantee Trust Life offers a broad range of products that can help its customers to build and protect wealth. 

For over eight decades, the Holston family has directed the operations of Guarantee Trust Life. The company believes in integrity. Guarantee Trust has a consistent track record of success, and in maintaining the confidence that its employees and policy holders place in it.

Guarantee Trust Life Insurance Review

Guarantee Trust Life posted record operating gains in the year 2016, making the company’s overall financial condition the strongest that it has ever had in its 80+ year history. The company grew surplus by 10% and assets by 11%, while increasing its reserves by 12 percent, and achieving net premium of approximately $219 million.

At the end of 2016, Guarantee Trust Life held more than $500 million in assets, of which $523 million is invested. The company has $445 million in total reserve for insurance policies and contracts.

The company also holds more than $77 million in net surplus – making it a prime candidate for being able to pay out its current and future policy holder claims. Guarantee Trust Life offers its products to 49 of the U.S. states, as well as in the District of Columbia. The primary headquarters of Guarantee Trust is in Glenview, Illinois.

Insurer Ratings and Better Business Bureau Grade

Due to its stable financial footing, Guarantee Trust Life has been rated as a B++ (Very Good) by A.M. Best Company. Also, even though Guarantee Trust is not an accredited company via the Better Business Bureau (BBB), the company has been given a grade of A+ by the BBB. This is on an overall grade scale of A+ to F.

Over the last three years, Guarantee Trust Life has closed out 19 customer complaints – of which three were closed out within the previous 12 months. Of the total 19 customer complaints, 11 had to do with problems with the company’s products/services, four had to do with advertising/sales issues, two were related to billing/collection issues, and another two had to do with delivery problems.

Life Insurance Coverage Offered Through Guarantee Trust

Guarantee Trust Life provides a variety of different life insurance coverage options. Unlike many other insurers that provide essential, individual term and/or permanent coverage, Guarantee Trust offers some other types of niche life insurance coverage alternatives. These include:

  • Critical Provider
  • Juvenile Life
  • MultiLife – Group Term Life Insurance

With the critical provider coverage, policy holders have the option of obtaining a ten or a twenty-year level, renewable term life insurance policy, along with a critical illness accelerated benefit rider. These plans offer death benefit coverage only, with no cash value build up – which can help to ensure that the premium is kept affordable. This is particularly the case when the insured is in good health at the time of policy application. The critical provider plan can be issued to qualifying individuals who are between the ages of 0 and 60.

These policies will pay a benefit upon the death of the insured or will pay out a “living benefit” if the insured is diagnosed with a covered health condition while his or her policy is still in force. If this is the case, the critical provider plan will pay out a lump sum benefit directly to the insured. These funds may be used to cover direct and/or indirect costs that are associated with the insured’s condition, as well as any other needs that the insured sees fit. The money that is received can help to replace lost income, to pay bills that are not covered by one’s health insurance plan, and/or even to take a recuperative vacation.

The critical provider plans also can be converted over to a permanent form of life insurance. This means that there will be both death benefit protection, as well as cash value build up. There will also no longer be a “time limit” on the coverage, provided that the premium continues to be paid.

The cash that is in the cash value component of a permanent life insurance policy can grow tax deferred, meaning that there is no tax due on the gain of these funds unless or until it is withdrawn.

Guarantee Trust Life also offers the Great Start juvenile life insurance plan. While nobody ever wants to think about the passing of a child, the reality is that unanticipated illnesses and injuries can and do occur. If this is the case, having the financial protection that is needed can be helpful, and it can provide one less thing to worry about at an already stressful time in life.

The Great Start life insurance policy offers life insurance that can grow with a child over time. This modified premium whole life insurance policy offers not only death benefit protection but also a cash value that builds up money on a tax deferred basis over time. These funds can be used by the child in the future for things such as the down payment on a home, funding the cost of college education, purchasing a new vehicle, or any other want to need.

Also, because this is a whole life policy, the amount of the premium will be locked in – guaranteed never to increase, even as the child becomes older (and even if he or she were to contract an adverse health issue).

With the Great Start plan, life insurance coverage may be attained for $5,000, $10,000, or even $20,000. There is no medical exam as a part of the approval process, and there is no waiting period before coverage begins. There are only three simple health questions on the application for coverage – and, all children who are under the age of 25 have just one set premium. When the child / insured turns age 31, 34, and 37, they will have the option to increase the amount of their coverage. The Great Start plan can offer an excellent opportunity to lock in a low rate of premium now, and to make sure that a child has the life insurance coverage that he or she needs – no matter what.

There is also a MultiLife group term life insurance plan that is offered via Guarantee Trust Life. This plan covers two people, and it provides death benefit amounts that are as high as $500,000. If both insureds should die within a period of each other, the death benefit can help family members with the financial needs that they may have.

The MultiLife group term is an all-risk coverage, which means that the benefit is paid out by the insurance carrier for any cause of death – including illness or accident – with only just a few exceptions. The interval periods (i.e., the amount of time in which both insureds on the policy must pass away for the death benefit to be paid out) include 30, 180, and 365 days.

There is also a single life benefit of $15,000 that can be added to this plan for helping to cover the cost of a funeral and other final expenses if one of the insureds on the policy dies before the other.

The MultiLife plan can help with providing affordable life insurance coverage that can help with protecting loved ones who may depend on one or both insureds for their financial support.

The Advantages of Guaranteed Issue Products

Typically, when you apply, you’ll have to wait to schedule the medical exam, wait for the paramedic, wait for the results, then wait for them to go through the underwriting. The process can take several weeks. With the guaranteed issue plans, you can get life insurance coverage in a fraction of the time. With some policies, it could be a matter of 24 hours.

Another advantage is that these plans can give life insurance coverage to applicants that wouldn’t be able to be accepted otherwise. A lot of people can’t get coverage before of their health or some pre-existing conditions such as severe diabetes. This is where no exam coverage can be beneficial.

Cost of Guaranteed Trust Life Products

Guaranteed Trust Life is a great company for those that have some sort of high risk addition and can’t get approved for traditional underwriting.  Without having to take a medical exam and essentially getting approved with no medical exam whatsoever, makes the cost of these products that much higher.

It is clear that shopping for life insurance may not be pleasant.  However Guaranteed Trust Life will make it easy for you.  If you are chronically ill you may want to look at a Guaranteed Issue Life Insurance or Guaranteed Acceptance Life Insurance policy.  These plans will help you to manage these expenses without burdening your loved ones.

Other Products and Services Available

In addition to life insurance coverage, Guarantee Trust Life also offers an extensive list of other goods and services from which to choose. These include the following:

  • Hospital Compensation
  • Critical Disease
  • Cancer, Heart Attack, & Stroke
  • Short Term Care
  • Accident Coverage
  • Group Gap
  • Association Gap
  • Group Accident
  • College and University Sports Coverage
  • College and University Accident Coverage
  • K – 12 Student Accident, Sickness, and Athlete
  • Child Care Facility Accident Coverage

How to Get the Best Premium Rates on Life Insurance with Guarantee Trust

If you are in the process of looking for life insurance coverage through Guarantee Trust Life – or from any other insurer – it will be helpful to work in conjunction with an independent insurance agent or broker. That way, you can compare the available policies and premium prices more carefully. Once you have located a price point, you can settle on which one will be perfect for you.

When you’re ready to see which life insurance policies and premium rates are open to you, we want to assist you. We are an independent life insurance brokerage, and we can help you with finding all the essential details that you need for making a wise buying decision. We will do this for you very promptly and smoothly – all directly from your computer. Therefore, if you are able to get started, all you need to do now is just merely click here and fill out the quote.

We know that buying life insurance coverage can be stressful. There are so many different plans and companies to choose from – and of course you want to move in the right direction. This can be done much easier if you have someone like us to help you. So, reach out to us – we’re ready to support you.

Source: goodfinancialcents.com

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When purchasing a house, it is almost an automatic reaction for many of us to purchase home insurance.

Indeed, home insurance is considered to be so vital that many mortgage providers will require you to have it prior to lending.

These policies help protect your home against incidents such as theft or damage from natural disasters such as fires or floods.

While home insurance is a useful and valuable benefit, it has its share of drawbacks, namely, the fact that it does nothing to protect the valuable items inside your home.

Your systems, such as heating and air conditioning, and appliances, such as washers and stoves, can add up to a hefty sum when considered collectively. If only there were a home insurance policy available to cover these needs.

Luckily, there is! Welcome to the world of home warranty plans. Below, we’ll look at America’s First Choice to determine whether or not it should make your short list of home warranty providers.

America’s 1st Choice Home Warranty: How It Works

If you have purchased a television, oven, or refrigerator, chances are it came with a standard manufacturer’s warranty of at least one year.

This protects you in the event that the product breaks or malfunctions. Home warranties are usually purchased through monthly installments to ensure continuous coverage.

If the item in question does fail, the policy provider is promising to repair or replace it to the original condition, meaning you are left satisfied that your investment is fully protected.

A home warranty plan works in precisely the same way, but covers appliances and systems existing within your home.

America’s First Choice proudly offers qualified technicians, quick repairs, and guaranteed replacements on everything from garbage disposals to water heaters in return for a small monthly payment.

There are different levels of membership available at different costs, depending on your specific budget, needs, and lifestyle. Policies are flexible and versatile, with the opportunity to add on specific features to further customize your plan. 

American’s First Choice is one of our favorite home warranty providers.

Here’s why.

How Do Plans Work?

A plan from America’s First Choice aims to make your life easier. When you need to make a claim, call the company’s direct number to connect with a customer service agent.

They will then schedule a licensed technician to visit you, diagnose the problem, and decide whether a repair or a replacement is the best solution.

A service fee of $60 will be required for the technician to visit your home, which is a competitive rate compared to other warranty plans of the same standard.

What Plans Are Offered?

America’s First Choice offers three main tiers of policies, with an additional option covering systems within your home.

Platinum

The top tier is the most comprehensive option, offering coverage for a variety of appliances:

  • Oven/range
  • Stove/cooktop

  • Clothes dryer and clothes washer
  • Gas or electric water heater
  • Refrigerator with ice maker
  • Garbage disposal
  • Garage door opener
  • Air conditioning or cooler
  • Built-in microwave
  • Heating system or built-in wall unit
  • Plumbing system
  • Electrical system
  • Faucets
  • Plumbing stoppages
  • Ductwork

As the premium option, the price is higher for the platinum policy. Any interested parties can call for a free quote, which may be adjusted depending on changes made to the plan and the items covered.

Gold

The medium option, gold, is very similar to the platinum policy, with a few distinct exceptions. In general, it will not cover any extras, such as ice makers or plumbing stoppages.

Items included in this plan are:

  • Clothes dryer and clothes washer
  • Oven/range
  • Stove/cooktop
  • Refrigerator
  • Gas or electric water heater
  • Garage door opener
  • Garbage disposal
  • Air conditioning or cooler
  • Heating system or built-in wall unit
  • Plumbing system
  • Electrical system
  • Ductwork

As a result of the less comprehensive coverage, this is generally a cheaper option for customers. 

Silver

Again, the Silver policy covers fewer items and systems and is an ideal option for those on a tight budget but still requiring some protection.

Coverage is included on the following:

  • Oven/range
  • Stove/cooktop
  • Clothes dryers and washer
  • Gas or electric water heater
  • Garage door opener
  • Garbage disposal
  • Dishwasher
  • Refrigerator

The Silver plan covers all the key essentials and is the most affordable of the three policy options.

Systems Only

In addition to the central three policies, America’s First Choice also offers a ‘systems only’ plan, which allows the homeowner to simply protect crucial systems in their home. These systems can be very expensive to repair individually.

This policy includes protection for the following:

  • Plumbing system
  • Electrical system
  • Heating systems
  • One unit of air conditioning or cooler systems
  • Gas or electric water heaters

If you are looking for the very basics to be protected, this is an ideal option.

The versatility and diversity of America’s First Choice make their policies popular and appealing. There is an option only to cover exactly what you want, or to go all out for total protection.

Exclusions

It is important to note that America’s First Choice plans do not currently cover any pre-existing conditions, whether these are known or unknown at the time of activation.

All items must be in good working condition in order to qualify for coverage.

Alternatives to America’s First Choice

America’s First Choice is a great option for your home warranty, but if you’re looking to shop around, there are multiple options that are worth your consideration.

You can get a quote in minutes to help inform your decision.

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The Pros and Cons

As with any policy, there are positives and negatives to take into account to help you make a balanced and informed purchasing decision.

Pros

  • Technician Flexibility: Policyholders can use any technician – unlike some other plans, homeowners are not required to use technicians endorsed and supplied by America’s First Choice, but may select someone of their choosing. The only requirement is that all technicians must be licensed, bonded, and fully insured.
  • Convenient Claim Filing: Claims can be filed in the 30-day waiting period, though the maximum payout will be limited to $150.
  • Affordable Service Rate: There’s a standard, flat service rate of $60 – helps homeowners to budget and be prepared in the event of a claim.
  • Guaranteed Coverage: A home warranty policy gives you peace of mind in exchange for a simple monthly payment.

Cons

  • Policy Exclusions: There are some well-hidden exclusions and exceptions to be aware of. Make sure to read your policy carefully so you understand what you’re signing up for.
  • Pre-Existing Exclusions: Any pre-existing conditions or issues will not be covered, whether you are aware of them or not at the time of taking out the policy. This means some essential items could be excluded from coverage.

Final Thoughts

America’s First Choice offers a clear, easy-to-use option for your home warranty. They offer three plan options, allowing you to select the one that will prove most beneficial to your home, needs, and lifestyle.

In addition, there is an option to purchase a plan to cover the systems in your home only—the ultimate budget option which still provides needed protection.

A home warranty plan can be a sensible, more affordable solution that keeps your home running smoothly.

Individual repairs and replacements can be pricey, involving a great deal of time and effort trying to find the best but most affordable solutions.

Replacing an appliance, such as an oven or refrigerator, can be expensive and even out of reach for those adhering to strict budgets.

A home warranty plan transforms this process into a single, affordable payment, meaning you will not have to spend vast amounts of money at short notice.

A warranty plan from America’s First Choice gives you the flexibility to choose what is right for you while also providing invaluable peace of mind and security.

Source: goodfinancialcents.com

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Last Updated on March 29, 2023 by Mark Ferguson

Rental properties are great way to invest your money, but qualifying for a loan on an investment property is not always easy. Loans for financing investment properties are much more difficult to get than a loan on an owner-occupied home, and it will cost you more money as well.

Many banks consider investor loans riskier than owner-occupied loans. The down payments are higher, the credit scores needed are higher, and the income requirements are greater for investor loans. This article will go over the different loans available on investment properties and how to qualify for them.

What is considered an investment property?

An investment property could be a rental property, a house flip, or a piece of vacant land. Banks are very specific regarding what they consider investment properties, and they base their loans on these classifications. Most banks lend on owner-occupied houses and investor-owned houses. Almost every bank has different loan options depending on what type of property you own.

Each bank can have a different definition, but for the most part, an owner-occupied home is a house that someone lives in for more than 6 months of the year. It is not a house that someone buys and stays in for a week on vacation. It is not a house that someone buys, leaving one room vacant in case they decide to crash there one night. One or more people on the Deed must live in the home more than half the time for at least one year (sometimes more). All other houses are considered investment properties, and the banks have much different loan programs for them than for owner occupants.

If you buy a house as an owner occupant with the intention of using it as an investment, it could be considered loan fraud. If you pretend to be an owner-occupant on a HUD home, it could even be a felony with potential prison time!

Owner-occupant loans

Owner occupants can typically qualify for FHA, VA, Conventional, USDA, or other loan options that have low down payments. The down payment for FHA can be as low as 3.5%. VA has a $0 down payment as does USDA. Conventional loans also have down payments as low as 3 percent for some buyers and 5 percent for most buyers. It is fairly easy for most buyers to qualify for an owner-occupied home if they have decent credit (over 620), make decent money, and have reasonable debts.

If you want to get into investment properties cheaper, one option is to buy as an owner occupant, live in the property 1 year (in most cases), and then rent the property out. You can also do this with a house flip, and if you live there for two years, the profit becomes tax-free in most cases!

Rental-property loans are much different. An investment loan requires at least 20 percent down in almost all cases, requires higher credit scores and better debt-to-income ratios, and there are limits to how many loans you can get with big banks. Most big banks will only let an investor have 4 loans in their name. Some smaller banks will allow an investor to have 10 loans in their name, but all the requirements get even stricter.

There are other options for investors that we will get into in this article, so do not lose hope if you don’t have the down payment, or have too many mortgages.

Why is it harder for an investor to get a loan?

Banks consider real estate investing riskier than normal home ownership. Banks figure that, if things go bad, someone will work harder to keep the house they live in than they will an investment property. The government also encourages homeownership with programs like FHA, USDA, VA, and local down payment assistance programs. Because the government helps with or runs these programs, the banks are more willing to offer low down payments to owner occupants.

How to qualify for loans for financing investment properties

When qualifying for a home mortgage, most banks look at multiple factors. One of the biggest issues investors run into is that they have to qualify for two houses if they have a loan on their personal residence. It is very important for people not to buy the most expensive house they can because of this. You must have a low debt-to-income ratio to qualify for a new loan, whether as an owner occupant or as an investor. If you max out your qualification on your personal home, it will be very difficult to qualify for a loan on an investment property.

Here is what banks look at on investor loans:

Debt-to-income ratios

You debt-to-income ratio is how much money you make each month compared to what your debt payments are each month. The percentages a bank will be okay with depends on the loan. Debt-to-income ratio does not take into account how much the balances are on your mortgages, only what the monthly payments are. Lower debt payments make it easier to qualify for a loan, and that is one reason I prefer a 30-year loan to a 15-year loan (30-year loans have lower monthly payments).

Time at a job

Most banks want to see a borrower at the same job for two years before they will give them a loan. If a borrower switches jobs but stays in the same field, banks will usually still lend, but you have to be careful when switching jobs. The bank will want to verify income to make sure you are working full time and actually have the job you say you have.

Credit score

Some loan programs allow credit scores under 600, but the lower your score, the more fees and costs you will pay. Almost all low-credit-score loan programs are for owner occupants. Investors usually need a credit score over 680 and sometimes over 720 if they are trying to get multiple mortgages in their names. You will get the best rates and terms the higher your credit score is.

Tax returns

Banks will verify your income with tax returns. If you claim very little income, it can be hard to get a loan. Many people who are self employed or who own businesses have a hard time qualifying for loans because they write off so many expenses. If you have little income, your debt-to-income ratio may be too high for you to qualify for a loan. One option is to claim fewer expenses and show a higher income on your taxes.

Foreclosures/short sales/bankruptcies

Banks do not like to lend to people who defaulted on past debts. If you had a foreclosure, it does not mean you can never get a loan again, but it makes it much tougher. Many banks will want to see a solid credit history up to 7 years after a foreclosure before they will lend to a buyer again. Other banks have shorter time frames. Short sales and bankruptcies also affect your ability to get a loan but usually have a shorter time frame than foreclosures.

What are the costs for an investment loan?

It is important to know that, when you get a loan on investment property, you need more than just the down payment. You need money for closing costs, loan costs, and reserves.

Closing costs

The closing costs on a loan consist of the origination fee, appraisal, recording fees, doc fees, and closing company fees. These costs can be up to or more than 3 percent of the loan amount. It is possible to ask the seller to pay these closing costs for you when buying a house, but it makes your offer weaker than one that is not asking the seller to pay closing costs.

Reserves

Lenders do not want an investor spending every penny they have on a house. They want to see some money left over to handle carrying costs or other issues that may come up. You need to have reserves left over after paying the closing costs and the down payment. Most banks require an investor to have at least 6 months of reserves. Reserves usually include the cost of any mortgages you have, including the property you are buying.

Interest rate

Interest rates on investor loans can also be higher than on owner-occupied loans. If the going rate on an owner-occupied 30-year loan is 5%, an investor may pay 5.5% or 6% depending on the bank. They may even pay higher rates if they have shaky credit or other issues.

What are the alternatives to bank loans?

Up to this point, we have talked about how investors can get a loan from a bank. You must be in a good financial position to get a loan from a bank. Some people do not have that luxury. So what are their options if they want to invest in real estate? There are many ways to get financing other than from big banks:

Local banks/portfolio lenders

Big banks have very strict lending guidelines because almost all of them sell their loans to other investors. Those investors set the guidelines that the banks must adhere to. Some local banks do not sell their loans and can be much more flexible when lending to investors. They are often called portfolio loans or portfolio lenders. I have gotten almost all of the loans on my rental properties from local banks.

Some local banks will also lend on house flips. They have much lower rates than hard-money lenders but require more down payment. Usually, a bank will finance 75% of the purchase price on a flip, and some banks will also finance the repairs.

Hard money

Hard-money lenders specialize in financing house flips, but they can finance rentals as well. A hard-money lender will have much higher rates than banks and will charge more fees, but most investors will have a much easier time qualifying with them than a bank. Hard-money loans have short terms (usually one year) and cannot be used on owner-occupant properties.

Hard-money loans are typically used for house flips, but you also may be able to use a hard-money loan to buy a rental and then refinance it into a long-term bank loan. I have seen hard-money rates as low as 8% recently, which is much lower than they used to be. A hard-money lender will often lend up to 90% of the purchase price and 100% of the repairs. Some hard-money lenders will finance the entire deal, but they are much more expensive, with rates above 12%.

Private money

Many hard-money lenders call themselves private-money lenders, but I think of private-money lenders as individuals. They are people you know: a family member, friend, co-worker, or another investor. I use a lot of private money on my house flips and on my rentals. Private money is easy for me because I literally send a text message or email, and the lender lets me know that day if they have money or not. Getting private money is all about relationships. I get most of my private funds from other investors.

The rates and terms for private money can vary greatly! I have some loans at 6% and others at 12%. The rate I pay depends on the lender, the deal, the time I need the money, and other factors. I am able to borrow 100% of the purchase price with most of my hard-money lenders, and one lends me 100% of the purchase price and 100% of the repairs upfront!

National rental property lenders

In the last few years, national lenders who specialize in lending to real estate investors have popped up. They are not banks but rather funds or companies that specialize in investor loans only. They have higher rates than most banks but do not worry as much about debt-to-income ratios or credit scores. They are more concerned about the property being a good rental and making money.

I have seen rates on rental properties as low as 5% with some of the bigger lenders. I have even seen 30 year fixed rate loans being offered. I am in the process of refinancing one of my properties to a 30 year fixed rate loan with one of these lenders. They will usually lend from 70% to 80% of the purchase price or value.

I have a list of hard money and rental property lenders here.

What is the best type of loan for an investor?

There are pros and cons to each loan. There is no best option because everyone has different goals, levels of experience, cash available, and different types of deals. I use different loans on my properties as well. I use bank money, hard money, and private money depending on the situation. The video below goes over the exact costs of these loans on my house flips:

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This article goes into the details of financing house flips as well.

Rental property owners will usually want a different type of financing since they hold the property for longer than a flip.

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This article goes into the details on getting loans for rental properties.

What is the first thing to do?

If you want to be a real estate investor but do not know where to start, I have a simple answer for you:

Talk to a lender or bank.

Even if you think there is no way they will give you a loan, go talk to them. They can tell you if you can get a loan, how much you qualify for, and what the loan will cost you. The meeting is free, and there is no reason not to do it. If the lender says you cannot get a loan, they should be able to tell you exactly why and help you fix any problems. They do all of this for free as well. Even if you want to wholesale, use hard money, use private money, or aren’t ready to invest for years, talk to a bank!

How to lower your debt-to-income ratio

One of the most common problems people have when qualifying for an investment property is a high debt-to-income (DTI) ratio. Most lenders will want to see a DTI  ratio of 45 percent or lower. If your DTI ratio is higher than this, it will be very hard to qualify for a loan. I have investors emailing me all the time and asking how to get around high DTI ratios. Even my portfolio lender, who is very lenient with lending requirements, will not lend to people with high DTI ratios. However, some of the national rental property lenders and hard-money lenders mentioned prior do not care about DTI ratios.

DTI ratio is calculated by taking your monthly debt payments and dividing them by your gross income before taxes. If you have $2,000 of monthly debt and $5,000 of gross income, you would have a DTI ratio of 40 percent ($2,000/$5,000 = 40 percent). That is a very simple equation, but it is not always simple coming up with the monthly debt and income, especially if you own rental properties.

You must count the property mortgage payment against your DTI ratio. Even though your DTI ratio may be 35 percent right now, a new mortgage payment may push that number to 45 percent, and you may not qualify for the mortgage. The DTI ratio will generally be the deciding factor on how large of a loan you can qualify for. The most payments you can qualify for on a new mortgage would be the payment that pushes you to the maximum DTI ratio a lender will allow. If a lender will allow a 40 percent DTI ratio and a $1,000 house payment pushes you to 40 percent, that would be the highest payment you could qualify for.

It is your monthly income and monthly debt payments that the banks pay attention to, not total balances. If you have a $2,000 credit card balance, it may not seem that it would affect your ability to qualify for a loan. But if your payments are $200 a month, that would have a huge impact on how high of a mortgage you can get. A $200 dollar a month difference in mortgage payments can reduce the amount you qualify for by as much as $40,000!

What expenses and income are included in DTI ratios?

If you are applying for a loan, everyone who will be on the loan will have to include these figures in debt:

  • Minimum credit card payments
  • Auto loans
  • Student loans
  • Consumer loans
  • Other financial obligations including child support and alimony
  • Your current housing payments do not count if you are going to sell the house before you buy the new house. If you are keeping the house, you will have to count the payments as debt.
  • Your estimated future housing expense, which includes principal, interest, taxes, insurance, and any HOA fees.

To calculate your income, you use:

  • Your gross monthly salary before taxes, plus overtime and bonuses. Include any alimony or child support received that you choose to have considered for repayment of the loan.
  • Any additional income like rental property profits. This is tricky because some lenders will not count any rental income until it shows up on your taxes. Other lenders will count 75 percent of your rental income if you are an experienced investor or have the house leased.

Usually, it is a little tricky calculating the DTI ratio because different banks calculate things differently. It is best to let the lender you are using calculate the DTI for you. If the bank comes up with a DTI that seems very high, double-check how they calculated it to see if they are doing something strange or put a wrong number in somewhere. Some banks will count depreciation of investment properties against you, even though that depreciation is not a monthly expense.

Why do different banks use different debt-to-income ratios?

Different banks use different DTI ratios, and different loan programs use different DTI ratios. VA and FHA typically limit borrowers to a 52 percent DTI ratios but in some circumstances may increase that percentage slightly. Fannie Mae allows up to a 45 percent DTI ratio on some loans, but you must have great credit. With credit scores under 700, you typically would have to have your DTI ratio under 36 percent.

As you can see, this can all get very confusing trying to figure out yourself. Here is a link to the Fannie Mae lending matrix which is even more confusing. The best thing to do is to talk to a lender, and if your DTI ratio is high, work on lowering it.

How can you lower your debt-to-income ratio?

The easiest way to lower your DTI ratio is to make more money. The more gross income you make, the higher your DTI ratio will be, but that is not the only thing lenders look at. It is not easy to simply start making more money, but many investors and self-employed individuals or business owners claim very little income on their taxes. Claiming little income is great if you don’t want to pay much in taxes. If you want to qualify for a loan, claiming little income can make it nearly impossible to buy a house. You may think you are making $10,000 a month, but if your taxes show you making $2,000 a month, your DTI ratio could be much higher than you think. Claiming more income on your taxes will mean you have to pay the IRS more, but it may be worth it if it allows you to get a loan.

Reducing debt is another way to improve your debt-to-income ratio. DTI ratios take into consideration all monthly debts that show up on your credit report. Usually, the shortest debts hurt you the most because they have the highest payments. Even though you think you are doing the smart thing by getting a 15-year loan instead of a 30-year loan on your primary house, it actually will hurt your DTI ratios. A three-year loan on a car will make your DTI ratio higher than a six-year loan. I am not saying you should always get the longest term possible on debt, but the lower your minimum payments are, the lower your DTI ratio will be. You can always make extra payments if you want to pay off your loans quicker.

What else affects the DTI ratio?

  • Minimum credit card payments: credit cards typically have very high interest and very high monthly payments. If you can pay off credit cards, it will greatly improve your DTI ratio, but you must pay off the entire balance.
  • Auto loans: car loans can destroy a DTI ratio! A $600 car payment is equivalent to a $120,000 mortgage and will reduce your ability to qualify for a mortgage by $600 a month.
  • Student loans: student loans may have low interest and low payments, but they still hurt DTI ratios. I think it is usually better to pay off other debt first depending on what the rates are.
  • Consumer loans: do you have a loan for a TV, furniture, home equity line of credit, or any other monthly payments that show up on your credit? Even a home equity line of credit that you are not using can count against your DTI ratio.

If you don’t have the money to pay off your debt, you may be able to consolidate it with a larger loan against your home that would have a lower interest rate and monthly payment.

Refinancing investment properties

A fantastic strategy to make your money go further when investing in real estate is to refinance properties. A refinance is when you get a new loan on a property that you already own. A cash-out refinance is when you get a new loan a property you already own, and the new loan pays off all other debts plus gives you back money. If you owe $80,000 on a house but refinance the property with a $100,000 loan, you would get $20,000 in cash back minus any closing costs for the new loan.

The BRRRR strategy is a great way to buy rentals with less money because you get most, if not all, of your investment back after the refinance. It stands for:

  • Buy: you have to get an awesome deal (can use financing or cash).
  • Repair: most houses that are awesome deals need some work.
  • Rent: with most income properties the banks want a home rented out before they lend on it.
  • Refinance: get a new loan that pays off any old loans, pays off the repairs, and any down payments.

Conclusion

Financing is one of the most important aspects of investing in real estate. You can make more money with loans than by paying cash. You can also multiply your money quickly using refinances, and there are many options for investors, even when you have bad credit or low income. It can be confusing figuring out what the best option is, but talking to a bank or lender is the first step.

Build a Rental Property Empire

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Source: investfourmore.com

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Dental Savings Plan vs. Insurance: Pros and Cons – SmartAsset

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Health insurance doesn’t cover your teeth. Your teeth can cause pain, get infected and need treatment, just like any other part of the body. But when it comes to actually getting treatment the standard health insurance doesn’t cover it. Instead, you need specialized coverage to pay for a trip to the dentist’s office.

The specialized coverage comes in two main forms. The first is dental insurance. This is standard insurance that covers most of the cost of treatment in exchange for a monthly premium and co-payments. The second is a dental savings plan. This is a discount program that gives you a percent off your bill in exchange for an annual membership fee. We’ll discuss how it works.

A financial advisor can help you plan for future healthcare expenses. 

What Is Dental Insurance?

Dental insurance works like standard health insurance. It is accepted at dentists’ offices, including specialists like orthodontists and endodontists, although depending on their range of services, some medical practices might accept it as well if they have dentists on staff. It pays for care that involves your teeth and gums.

With dental insurance, the insurance provider pays for a portion of each treatment. The exact amounts range based on the nature of the treatment and the nature of your insurance plan. For example, many if not most plans will pay for 100% of preventative treatment like routine cleanings and checkups, while the same plans might not pay for any part of a cosmetic procedure like teeth whitening.

What Do You Have to Pay?

You have to pay any amount that your insurance doesn’t cover, which are out-of-pocket expenses. For example, if your insurance covers 50% of a $700 treatment, that means the plan would pay $350 and you would pay the remaining $350.

Like other forms of health insurance, dental insurance is structured around three main forms of payment from the customer:

  • Premiums – Monthly payments that you make for the plan
  • Co-payments – Payments that you make when receiving any given service
  • Deductibles – The amount you pay before your insurance covers costs

Premiums are fixed. You pay the same amount each month for a given plan. Co-payments and deductibles will change based on the nature of the treatment that you get. Your insurance plan will have different co-payments for any given treatment and will apply different rules about deductibles.

Types of Dental Insurance 

Like with other forms of medical insurance, there are different major categories of dental insurance. The three main types of dental insurance are:

  • Dental Health Maintenance Organizations – this offers lower premiums. But it has more restricted coverage options.
  • Dental Preferred Provider Organizations – Midrange premiums and more treatment options, but fewer providers.
  • Dental Indemnity Insurance – Higher premiums, but more options and coverage.

Pros and Cons of Dental Insurance

Pros

The main advantage to dental insurance is coverage. This works the same way as all other forms of medical insurance, in that your insurance company pays for a portion of your treatments. They will pay for dental services in whole or part, and your spending for covered services is capped each year.

That doesn’t mean your out of pocket expenses wont’ be high. Dental insurance isn’t subject to many of the same rules as health insurance, so if you need specialty services like braces, a retainer or a root canal you can still expect to spend thousands of dollars out of pocket. That’s still far less than you would spend without insurance or with a dental savings plan though. It’s also far more likely that any given dentist will accept your insurance, as fewer providers accept dental savings plans compared with insurance.

Cons

The main disadvantage to dental insurance is the costs involved when you don’t need treatment. Dental insurance isn’t nearly as expensive as health insurance, but this will still cost a lot more than something like a dental savings plan. Depending on how much coverage you need and how many people are in your household, you can expect to spend anywhere from $20 to $200 per month on dental insurance.

An individual looking for decent, but not comprehensive, coverage should expect to spend at least $50 per month.

Another way of looking at it is this: Dental insurance is better if and when you need treatment. You will spend less money and find care more easily. A dental savings plan is better when you don’t need treatment because it will cost you less.

What Are Dental Savings Plans?

A dental savings plan, otherwise known as a “dental discount plan” is different than health insurance. Instead, it could be thought of as a membership. With a dental savings plan, you pay an annual fee, typically $150 or less for a family, to enroll. In exchange, you receive a discount on services at participating dental providers.

For example, you might receive 40% off a routine cleaning or 25% off the cost of filling a cavity. Unlike insurance, the savings plan doesn’t pay for these costs. Instead, they are negotiated discounts for plan members.

You are responsible for paying for the rest of the costs of any given service. For example, if you have a $1,000 procedure and your dental savings plan gives you a 20% discount, you will pay the remaining $800.

The details of a dental savings plan can vary widely. Every program will have different dentists who participate, different costs for membership and will offer different discounts for services. Generally, fewer dentists accept a savings plan membership than insurance, so you will usually have a smaller provider network to choose from.

Who Should Consider a Dental Savings Plan

There are several situations in which it makes sense to consider a dental savings plan.

If you’re on Medicare. Such plans don’t cover most dental care (including procedures and supplies like cleanings, fillings, tooth extractions, dentures, dental plates or other dental devices). Original Medicare may pay for some dental services that are closely related to other covered medical services. Medicare Part A will also pay for certain dental services that you get when you’re in a hospital.

If you’re unemployed. These plans are relatively inexpensive and, unlike many dental insurance plans, you can access the benefits in two or three days.

If your teeth are in great shape. People who consistently floss, brush and gargle several times a day and have a history of zero cavities, may not need coverage.

Pros and Cons of a Dental Savings Plan

Pros

The main advantage of a dental savings plan is the up-front cost. Typically one of these programs will cost several hundred dollars per year in membership fees. By contrast, dental insurance can cost several hundred dollars per month (if not more) in premiums.

You also have no coverage caps with a standard dental savings plan, meaning you don’t have maximums or deductibles. And you simply receive the set discounts for any given service.

Cons

However, the downside here is that you will almost always pay more for the actual services. Despite co-pays and deductibles, insurance will typically cover more costs when it comes to receiving treatment, so you can expect a savings plan to cost more out of pocket.

The result is that a dental savings plan can often fill a role similar to catastrophic insurance. If you are healthy enough that you only need the occasional cleaning and checkup, this might be a good option. If you will need real treatment, this may end up costing you more in the long run.

Bottom Line

Dental insurance is health insurance that applies to your teeth. In exchange for premiums and a co-pay, the insurance plan pays for the rest of your treatment. A dental savings plan is a discount program, in exchange for an annual payment, that gets you a negotiated percentage off your treatment at the dentist’s office.

Tips for Managing Your Healthcare Costs

  • Just as you would consult a healthcare professional to assess your well-being, be sure to consult a financial professional to assess your fiscal well-being. Finding the right financial advisor who fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with three vetted financial advisors who serve your area. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.
  • Considering alternatives to health insurance is important for maintaining a healthy budget. A comprehensive budget calculator can help you understand which option is the best for you.

Photo credit: ©iStock.com/mihailomilovanovic, ©iStock.com/bymuratdeniz, ©iStock.com/LightFieldStudios

Eric Reed
Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.

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When you apply for a loan, you might have the option to add a co-signer or co-borrower. And while the terms are similar, a co-borrower — or joint applicant — shares ownership of the loan and assumes responsibility for payments from the start.

On the other hand, a co-signer is only liable for the loan if the primary borrower fails to make payments.

Quite a few lenders will allow co-borrowers on a loan, but co-signers are much rarer. When you apply, confirm with your lender and the other person on the loan which term applies best to avoid confusion down the road.

Get pre-qualified

Answer a few questions to see which personal loans you pre-qualify for. The process is quick and easy, and it will not impact your credit score.

What are the differences between a co-signer and a co-borrower?

The most important difference between a co-borrower and a co-signer is the degree of investment in the loan.

A co-borrower has more responsibility (and ownership) than a co-signer because a co-borrower’s name is on the loan, and they are expected to make payments. A co-signer only backs your loan and will not need to make payments unless you are unable to.

Co-signers

A co-signer agrees to take responsibility for repaying a loan if the primary borrower misses a payment. The co-signer typically has better credit or a higher income than the primary borrower, who might otherwise not get a loan application approved without the help of a co-signer.

Co-signers typically have a close relationship with the primary borrower. A co-signer is typically a parent, immediate family member or spouse.

How it works

A co-signer is a guarantor for the primary borrower. Co-signers promise to assume responsibility for repayment if the primary borrower doesn’t pay as required.

Pros of a co-signer

Adding a co-signer to a loan application could improve a borrower’s chances of qualifying and securing a lower rate. Plus, if the loan is repaid on time, it can improve both parties’ credit scores.

Risks of co-signers

Like co-borrowers, co-signers take on financial risk. Co-signers are legally responsible for paying the outstanding debt that the primary borrower fails to pay.

Who a co-signer is best for

Co-signing is typically preferable if only one of the borrowers will benefit from the loan. For example, if a young person without established credit wants a personal loan, the bank might decide that the loan is too risky unless someone with better credit agrees to share legal responsibility for repayment. A parent with good credit might agree to co-sign with the understanding that their child will pay it back.

Co-borrowers

A co-borrower, sometimes called a co-applicant or joint applicant, is a person who shares responsibility for repaying a loan with another person — and who has access to the loan funds. Applying for a loan with a co-borrower reassures the lender that multiple sources of income can go toward repayment.

Applicants with co-borrowers are more likely to receive larger loan amounts since they are viewed as less risky for lenders.

How it works

In addition to both parties being responsible for making payments toward the loan, assets that guarantee the loan — like a home or car — may be owned by both co-borrowers. Each co-borrower has equal access to the loan funds. And if the loan was used to secure property — like a vehicle — both co-borrowers will be listed on the vehicle’s title.

Pros of a co-borrower

Similar to adding a co-signer, adding a co-borrower could help a consumer secure a lower interest rate. In addition, depending on the co-borrower’s income, it might also help them qualify for a higher loan amount.

Risks of co-borrowers

The biggest risk for co-borrowing on a loan is that each co-borrower is responsible for repayment from the start. Any actions by either co-borrower that impact the loan will have a ripple effect on the other borrower.

Who a co-borrower is best for

Co-borrowing is typically preferable if both borrowers will benefit from the loan. For example, if two people start a business together, they might take out a personal loan as co-borrowers and work on paying it back together. Both directly benefit from borrowing and enter the transaction knowing that they’ll each be making payments.

How to choose between a co-signer or co-borrower

The right approach depends on what your goals are for the loan. Consider these factors when choosing between a co-signer and a co-borrower.

Co-signers

A co-signer won’t have to put up collateral or accept responsibility for regular payments. Also, if the primary borrower makes on-time payments, the co-signer will never have to worry about the loan — and may still benefit from an improved credit score. .

On the flip side, if the primary borrower defaults, the co-signer will be on the hook for payments. Plus, they won’t be able to use the loan funds and might have difficulty getting approved for other loans since it still counts toward their total debt-to-income ratio (DTI).

Co-borrowers

A co-borrower benefits from the loan directly. Lenders may also offer lower rates and higher loan amounts, especially if both borrowers have good credit. And since each borrower has equal responsibility, you may not need to provide additional collateral to secure the loan.

What should I do before co-borrowing or cosigning?

Before co-borrowing or cosigning a loan application, have an open conversation with the other person. Determine if the loan is necessary, consider what alternatives there are and discuss each person’s financial picture and future goals.

Because both options have considerable financial risk, you should consider a contract that outlines how responsibility will be split and what happens in worst-case financial situations. It is also useful to research your state’s co-borrower and co-signer rights. There may be protections around property ownership and how credit is impacted.

Bottom line

Ask yourself a few questions before applying for a loan with someone else:

  • Can you afford to make payments toward the loan?
  • How stable is your source of income?
  • How will co-signing or co-borrowing affect your future goals?
  • What are the financial habits of the co-applicant or primary borrower?

Co-borrowing might make sense if you know the risks and want to borrow money with someone to accomplish a common goal. Alternatively, co-signing might be right for you if you want to help out a loved one by guaranteeing a loan.

Source: thesimpledollar.com

Apache is functioning normally

A spendthrift trust is a trust that limits the beneficiary’s access to the trust assets according to specific terms the grantor sets. Spendthrift trusts help ensure that beneficiaries can’t squander their inheritance; they also protect trust assets from creditors.

Rather than allowing the beneficiary to receive a lump sum, the trustee releases the money incrementally

. For that reason, a spendthrift trust can be especially useful if your beneficiary is:

  • Not mature enough to make wise spending choices.

  • Impulsive with money.

  • In heavy debt, or at risk of going into heavy debt.

  • Easily fooled or defrauded.

  • Suffering an active addiction that might cause excessive spending.

  • A child with functional needs and is eligible for SSI or Medicaid

    .

  • Involved in or at risk of getting a divorce (courts may not consider trust assets as marital property when dividing assets)

    .

  • Employed in an industry where lawsuits are common (creditors typically can’t seize trust assets to pay settlements).

How does a spendthrift trust work?

A spendthrift trust is a separate legal entity with three major elements:

  • A grantor: Also known as a “settlor,” the grantor is the person who creates the trust and transfers their assets into it.

  • A beneficiary: This is the person who receives benefits from the trust.

  • A trustee: This is the person who manages the trust assets in accordance with the terms of the trust. You may be able to appoint yourself as trustee, but if you do so, you’ll need to also appoint a successor trustee who can take over after you die or become incapacitated.

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Best for: Ease of use. Cost: One-time fee of $159 per individual or $259 for couples. $19 annual membership fee thereafter.

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Key characteristics

Special wording

What distinguishes a spendthrift trust from other types of trusts is that it contains a spendthrift clause (also known as a spendthrift provision). This spendthrift clause designates the trust itself as the only owner of trust assets, rather than automatically transferring ownership to your beneficiary when you die. The terms of the trust explain exactly how and when the trustee will release the funds to your beneficiary over time according to a schedule you create.

Creative timing

You can limit the beneficiary’s access to funds. The trustee can transfer fixed amounts on fixed dates, for instance, or you can allow the beneficiary to draw up to a certain amount of money from the trust at certain times. You can even design exceptions for emergencies.

Potential creditor protection

Although assets in a spendthrift trust are often safe from creditors, there are a few exceptions to be aware of, and you should check your state’s rules before proceeding:

  • Child support obligations.

  • Creditors with an enforceable court judgment against the beneficiary.

  • Trust income that’s higher than the beneficiary needs for support.

Alternatives

One alternative to a spendthrift trust is a spendthrift living trust (an inter vivos trust), which disburses funds in increments while you’re still alive. You can act as trustee and make the scheduled disbursements yourself. However, you must name a successor trustee who can take on this responsibility after you die.

Spendthrift trust examples

Here are a few examples that show a spendthrift trust in action.

  • Miriam is 95 years old and wants to leave her entire estate, worth $450,000, to her beloved great-nephew, Kyle. Although Kyle is mature and responsible, Miriam doesn’t want to give him access to his inheritance all at once. Kyle is still carrying massive medical debt from a major emergency surgery that he’s fighting with his health insurance company to cover. With it unlikely that the insurance company will ever pay out, and creditors constantly hounding Kyle, Miriam decides to create a spendthrift trust that gives Kyle a monthly allowance of $3,000. This will give Kyle enough to make his life more comfortable as he recuperates, but it will also protect the bulk of the estate from creditors, because whatever remains in the trust is considered a trust asset and not Kyle’s personal property to garnish.

  • Edward wants to leave his granddaughter, Amanda, $50,000 when he dies. Although Amanda is a sweet and loving granddaughter, she’s only in her early twenties and has a notorious history of reckless spending. To prevent Amanda from squandering her inheritance, Edward decides to create a spendthrift trust that allows Amanda to draw up to $1,000 monthly from the account. This lets her treat herself to some luxuries without immediately spending her whole inheritance.

Are spendthrift trusts revocable or irrevocable?

Spendthrift trusts can be revocable (meaning they can be modified at a later date if desired) or irrevocable (meaning they cannot ever be changed).

  • Revocable spendthrift trusts have the advantage of flexibility, so that you can adjust the terms if your beneficiary matures or their situation changes. 

  • Irrevocable spendthrift trusts have the advantage of potentially reducing estate taxes. 

Spendthrift trust pros

Spendthrift trusts bring a number of advantages:

  • May protect the beneficiary’s trust assets from most creditors and lawsuits.

  • Gives the beneficiary a reliable stream of income while preventing irresponsible spending of the assets.

  • Grantor can retain control over the assets.

  • Spendthrift trust assets are often excluded from the overall estate for tax purposes.

  • Not subject to probate if established while you’re alive.

Spendthrift trust cons

There are a few disadvantages to spendthrift trusts:

  • They can be costly to set up and maintain. 

  • If your trust is irrevocable, you won’t be able to modify it if circumstances change.

How to set up a spendthrift trust

You can set up a spendthrift trust yourself by using an online estate planning platform that can guide you step by step. However, you may prefer working directly with an estate planning attorney because even minor errors could compromise or invalidate your trust. Also, states have different rules about when spendthrift trusts are allowed; which creditors can go after assets in spendthrift trusts; and what can happen to the disbursements.

Consider a few important questions that can help ensure your trust will operate according to your needs and wishes:

  • Who will act as trustee? If you’ve chosen yourself as trustee, who will be your successor trustee if you’re no longer able to fill that role?

  • Do you want your trust to be revocable or irrevocable?

  • How often should the beneficiary receive payments, and in what amount?

  • Do you want the payments to be a percentage of the trust principle or a percentage of trust income?

  • Should payments occur on a strict schedule or leave room for some flexibility?

  • For how many years should payments continue? Do you want payments spread over the expected lifetime of the beneficiary or over a limited number of years?

Source: nerdwallet.com

Apache is functioning normally

Home Warranty of America prioritizes environmentally friendly solutions and provide coverage for every home, individual, and state.

While Home Warranty of America is headquartered in Illinois, the company provides coverage for all fifty states in the US.

They have more than 20 years of experience with delivering affordable coverage solutions to homeowners with great energy efficient upgrade options.

Home Warranty of America Overview

Home Warranty of America started in 1996 and is now one of the leading providers of home warranties.

Below is a review of their coverage, plans, pros and cons, to help you make an informed decision.

Coverage Features

Home Warranty of America provides comprehensive coverage for all of your home repair needs, putting them among our top picks for home warranties.

If you encounter problems with anything covered under your home warranty, they’ll send someone out to help right away. Some of the common coverages they offer are listed below.

Ductwork

Your ductwork circulates hot and cold air throughout your house. It keeps you warm in the winter and cool in the summer.

Without it, your house would feel stuffy with stale air.

If something is wrong with your ductwork, you can file a claim with Home Warranty of America to have it inspected and fixed so you can get back to your normal life.

Water Heater

When it comes to doing dishes or taking a bath, you need hot water. Your water heater provides your home with the water you need to go about daily living.

When your water heater is on the fritz, Home Warranty of America can send someone out to inspect and fix it quickly so you can go back to showering every day.

Electrical System

Whether you like to make a light breakfast every morning in your toaster or read with a lamp by your bed at night, you need electricity.

Electricity flows through your electrical system just like air flows through your ducts.

You need it every day to enjoy most of your home’s features. When the lights go out, Home Warranty of America will be there to turn them back on.

Doorbells, Burglar Alarms, and Fire Alarms

One unique coverage feature from Home Warranty of America is doorbell, burglar alarm, and fire alarm options.

Most home warranty providers don’t cover these systems, but Home Warranty of America does.

For your safety and the safety of your home, this coverage goes above and beyond other home warranty solutions.

Home Appliances

Your home appliances do all sorts of things for you. Your refrigerator keeps your food cold, your microwave heats up leftovers, and your dishwasher gets everything clean when you’re done.

Other covered appliances include your garbage disposal, range, cooktop, oven, and trash compactor.

To make life easier for you, Home Warranty of America covers all these items.

Warranty Plans

Home Warranty of America provides comprehensive plans at low prices so you can have the peace of mind you need.

Their choice of $75 or $100 service fee saves you money over hiring your own contractor to diagnose and fix the issue outside of a home warranty plan. Pricing varies by state.

Premier Plan

 The Premier Plan includes coverage for the following:

  • heating system and furnace
  • ductwork
  • plumbing system and stoppage
  • toilet
  • permanent sump pump
  • water heater including tankless water heaters
  • instant hot water dispenser
  • whirlpool bathtub
  • electrical system
  • ceiling fans and exhaust fans
  • doorbells, burglar alarms, fire alarms
  • central vacuum
  • dishwasher and garbage disposal
  • built-in microwave, range, cooktop, and oven
  • trash compactor, garage door system, kitchen refrigerator with ice maker, and clothes washer and dryer.

Premier Plus Plan

 The Premier Plus Plan includes everything in the Premier Plan, plus the following:

  • air conditioning system
  • increased toilet replacement
  • plumbing fixtures
  • faucets
  • showerheads

The Good

Home Warranty of America not only provides excellent coverage options, but they have several additional benefits that customers will enjoy if they sign up.

Nationwide Coverage

With a name like Home Warranty of America, you would expect them to cover every state in the US, and they do. They even cover the District of Columbia.

Anyone in the United States can rest assured that as long as they find a plan and pricing they like, they’ll qualify for coverage.

Easy Quotes

While price varies based on state, it’s easy to find, and they provide an easy-to-read format for anyone interested in a home warranty plan.

They offer coverage for homeowners, real estate professionals, buyers, and sellers. You’ll see a list of your covered services and your payment options so you can make an educated decision.

Online Tips

Home Warranty of America offers an extensive list of home maintenance tips as well as information about home warranties and how they work.

This provides a great benefit for any homeowner who might want to troubleshoot the problem themselves before paying the service fee. For a do-it-yourself approach to home ownership, Home Warranty of America can help.

GreenPlus

Home Warranty of America provides GreenPlus to customers who choose to add it to their plan.

It can help cover the cost of appliances that should be replaced with Energy Star appliances including refrigerators, dishwashers, washing machines, and more.

Home Warranty of America’s membership with the Ethical Directory and United States Green Products makes this benefit possible.

Online Claims

Home Warranty of America makes it easy to submit a claim anytime. Their easy online claims section allows you to request a repair or replacement whenever it’s convenient for you.

Just fill out the form and send it for review, and you’ll be met with a quick response from the company.

No Inspections

No matter what your house looks like, how big it is, or the age, you will qualify for coverage with Home Warranty of America.

They won’t require an inspection to cover your home or the appliances within, so you get the peace of mind you need when buying a home or trying to protect your home from normal wear and tear.

The Bad

As with any company, there are some downsides to what Home Warranty of America offers.

Customer Service

They don’t have great customer service options. The only way to submit a claim is online, so while it’s easy to do, some customers may feel that the lack of a mobile option prevents it from being convenient.

When contacting customer service, you have live chat, phone, and email options, which seems fine until you realize that it’s not 24 hours a day like some other providers offer. However, when they are available, it’s easy to hop on a chat session when you need help.

Contractual Obligation

Home Warranty of America requires that all customers sign a one-year contract. Other providers will let you go quarterly or even month-to-month.

With Home Warranty of America, you’re locked in for a year whether you like the services or not.

If you don’t want to sign a long-term contract, it’s not a great option for you.

Alternatives to Home Warranty of America

As you shop for the perfect home warranty company, take a look at some of Home Warranty of America’s top alternatives.

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The Bottom Line

Home Warranty of America provides extensive warranty plans with add-on options to help you customize your offering.

The prices are low, but they do require you to sign a one-year contract. Their GreenPlus plan is an excellent choice for the economically-minded individual and a fantastic way to get a discount on new appliances.

If you’re in the market for a home warranty, Home Warranty of America is available to all individuals in all fifty states including the District of Columbia.

They also have options for real estate professionals, buyers, sellers, and existing homeowners.

Source: goodfinancialcents.com

Apache is functioning normally

The reality is that, much like that red wine stain on the rug, Sallie Mae student loans aren’t likely to evaporate into thin air. That’s because Sallie Mae is a private lender now.

And despite what you may have heard, there is currently no such thing as private student loan forgiveness.

Forgiveness is limited to federal education loans, and even then, the options are few. There are federal student loan forgiveness programs for those who go into public service or teaching. But other than that, it’s extremely difficult to cancel student loans.

Table of Contents

•   Can Older Sallie Mae Loans Be Forgiven?

•   What If You Don’t Qualify for Loan Forgiveness?

•   Are There Alternatives to Private Student Loan Forgiveness?

•   Can You Refinance Sallie Mae Student Loans?

Can Older Sallie Mae Loans Be Forgiven?

If you’re confused about whether your Sallie Mae loans are private or federal, it may be because the company has evolved over the years.

Though Sallie Mae, aka the SLM Corp., no longer services federal loans, that wasn’t always the case.

Sallie Mae was created in 1972 as the Student Loan Marketing Association, a government-sponsored enterprise that serviced federal education loans. Even though it became fully privatized in 2005, the company continued to service federal loans made under the Federal Family Education Loan (FFEL) Program until that program ended in 2010. Then, in 2014, Sallie Mae split into two companies: SLM Corp. and Navient Corp and shifted all its federal student loans to Navient.

So, if you have an older loan — one that originated before 2014 — it may have been a federal loan that started out with Sallie Mae and then moved on to Navient. And if that’s the case, you may be able to apply for Sallie Mae loan forgiveness.

Applying can be complicated, and you may have to consolidate your loans into a Federal Direct Consolidation Loan as part of the process.

You can see if your old debt is a federal education loan by visiting the Federal Student Aid website. If it is, and you want to seek loan forgiveness, you’ll eventually make your application to the government.

Keep in mind that Navient shifted federal student loan accounts to Aidvantage, a division of Maximus Federal Services, after Navient cut ties with the Department of Education in late 2021.

You can contact your current loan servicer for information on how to get started.

Recommended: How Do Student Loans Work? Guide to Student Loans

Take control of your student loans.
Ditch student loan debt for good.

What If You Don’t Qualify for Loan Forgiveness?

If federal student loan forgiveness seems a long shot for you, don’t despair — you also may want to look into deferment or forbearance. These strategies allow qualifying borrowers to temporarily reduce or stop their federal student loan payments. However, depending on the type of federal loan you have, interest may continue to accrue while payments are paused, which could increase the overall cost of the loan.

Looking for a more long-term solution? An income-based repayment plan can offer qualified applicants another way to lower federal student loan payments. The four options limit how much money you put towards student loans each month based on family size and discretionary income (the difference between your annual income and 150% of the poverty guideline for your family size and state of residence).

You can contact your loan servicer for assistance with federal loan repayment. If you don’t know who your servicer is, you can find out by visiting your Federal Student Aid dashboard or calling 800-433-3243.

Are There Alternatives to Private Student Loan Forgiveness?

Although there currently is no such thing as Sallie Mae private student loan forgiveness, there are alternatives available to borrowers struggling to manage their private loans.

Private lenders don’t offer income-driven repayment plans. But if you feel comfortable calling Sallie Mae (or any lender) directly, you could ask about other repayment plans they might offer or what ideas they might have for your situation. At the very least, it doesn’t hurt to learn more about your loans.

And some lenders, including Sallie Mae, offer deferment and forbearance for those who qualify.

The timeline and cost for each of these programs may vary by lender. Sallie Mae, for example, may require a “good faith payment” to go into forbearance, and you can press pause on payments for only three months at a time, for a maximum of a year.

Something else to consider if you’re thinking about deferment or forbearance is that — just as with federal loans — even though the payments are paused, interest may continue to accrue. And this can increase the total cost of the loan.

Recommended: Private Student Loans Guide

Can You Refinance Sallie Mae Student Loans?

If you can’t make any headway with your current repayment plan, you can always look into refinancing student loans.

Though there are advantages to refinancing student loans, there are potential drawbacks to consider. For instance, if you refinance your federal loans through a private lender, you may give up some important benefits, such as access to the payment pause and federal repayment programs.

Sallie Mae doesn’t offer student loan consolidation and refinancing anymore, but you could potentially reduce your interest rate by refinancing your student loans with a different private lender, especially if you have a good credit history and strong potential earnings.

If you’re approved, the new lender will pay off your old loans and issue you one new student loan — hopefully with a lower interest rate. A lower rate can save money on interest payments over the life of the loan, provided that the loan term isn’t extended.

Though you can’t combine federal and private student loans through a federal loan consolidation program, some private lenders will refinance both.

You could extend your loan term if you’re hoping to make your monthly payments more manageable, or you could opt for a shorter loan term to try to get out of debt sooner.

Recommended: Student Loan Consolidation Rates: What to Expect

The Takeaway

Lender Sallie Mae used to offer federal student loans, and if you received one, you may be able to qualify for loan forgiveness. But federal student loan forgiveness can be hard to get — and if you have a private student loan through Sallie Mae, forgiveness is not available. There are, however, repayment options, including refinancing your student loans.

It might be beneficial to look for a refinancing lender that offers extras. SoFi members, for instance, can qualify for rate discounts and have access to career services, financial advisors, networking events, and more — at no extra cost.

Refi with SoFi today to get flexible terms and a competitive low rate before interest rates rise even higher!

FAQ

Does Sallie Mae service federal loans?

Sallie Mae only services private student loans, though that wasn’t always the case. If you have a loan that originated before 2014, it may have been a federal loan that started out with Sallie Mae and then moved to Navient. In early 2022, Navient shifted all of its federal student loans to a new servicer, Aidvantage.

How do I know whether my student loan is private or federal?

You can visit the Federal Student Aid website; information about your federal loans will be listed in your dashboard.

What student loans are not eligible for forgiveness?

Private student loans are not eligible for forgiveness.

SoFi Student Loan Refinance
If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.

CLICK HERE for more information.

Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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Source: sofi.com