Home Inverness Colorado Income 6 mistakes consumers make when taking out loans

6 mistakes consumers make when taking out loans

0

Loans are inevitable for most adults. If you buy a house or a car, use a credit card, or go to college, you may need to take out a loan. U.S. household debt currently stands at $ 11.7 trillion, according to a recent Federal Reserve Bank of New York survey that relies on information from 40 million people.

But taking out a loan doesn’t always work well, because whoever has treated with a debt collector can attest to this. So what mistakes are you most likely to make in the loan process?

Do not read the fine print. There are always important gems of information buried in all this legal jargon, so you owe it to yourself to take a good look at what you’re signing up for, says Leslie Tayne, financial attorney and debt specialist who runs the Tayne Law Group PC. . , based in New York.

“A lot of people tend to just sign the dotted line, listen to the seller and not recheck the deal,” says Tayne. “I see this all the time. A client will come and tell me that he was not aware of something about the loan, like a lump sum payment or an increase in the interest rate.”

But if you sign the contract, you tell the lender that you know – even if you don’t – what, of course, is the problem.

Make a loan for someone else. Co-signing is a mistake, but some people double that mistake by taking out a loan and giving the money to someone else.

“You would be surprised how often this happens,” says Michael Poulos, CEO of Michigan First Credit Union in Lathrup Village, Michigan. He says his staff have, on occasion, encountered loan scenarios such as parents coming to borrow money for their children and clients needing money to bail out family members from prison. But one of the most interesting uplifting accounts of borrowing money for someone else came from a man who financed a loan to buy his girlfriend his own set of wheels.

Sweet, right? “But then his wife discovered the car,” says Poulos.

The man then decided he didn’t want to pay for the vehicle and the girlfriend broke up with him. The car was repossessed at one point and the man’s credit rating plunged.

Don’t think long term. This new loan will likely be a big chunk of your budget for quite a while. So, abide by these conditions and familiarize yourself with this loan before committing.

“Asking for a loan, like any contract, means building a relationship. In fact, we call our loan team members “relationship managers” because in any good relationship there is honest communication and discussion, ”says Marty Gallagher, Executive Vice President. and director of credit at Beneficial Bank, headquartered in Philadelphia. “It’s a process that we go into together, and we want to make sure there is a healthy conversation about the goals so that we can find a way to accomplish them in a responsible manner. “

Gallagher is right. The more desperate you are for the loan – ie. monthly living expenses. The last thing to do is solve one problem and create another.

Let emotions fuel your borrowing cravings. Poulos says this is a classic mistake, and it ties in with the fact that consumers don’t think long term.

“People will find themselves in a crisis, or they will get excited about something, and they will want a loan to fix everything. We have had clients who took out a loan of $ 1,000 so they could rent a limo and get a car. hotel room for a date, without thinking about the fact that they will be paying for this amazing night out over the next 12 months, ”Poulos said.

He says bank staff have asked people to apply for plastic surgery loans. People even called from a casino to take out a loan.

That consumers are doing this might not come as a surprise, but admitting it to the cashier or the bank manager could be. Here again, it is the era of over-sharing. “You would be surprised what they tell you,” says Poulos.

Skim the paperwork. Errors in loan applications are common. “One of the biggest mistakes we see is the lack of preparation,” said Gallagher. “Some people think that a loan is just a form – a quick application that you can fill out when you go shopping.”

True, Gallagher says bank staff will help consumers to minimize errors. But these professionals still depend on consumers to be focused enough to read the documents.

When it comes to mortgage loansMelissa Cohn, president of GuardHill Financial, a Manhattan-based residential mortgage company, sometimes says that a married consumer will change their name – but not legally. The bank, Internal Revenue Service, and your driver’s license may have one name while your Social Security card displays another. It can cause problems.

But everything works out in the end, right? In fact, the borrower can be turned away, but this is rare. “Ninety-nine percent of the time a resolution is found on the same day, but these eight-hour shutdowns are approximate,” Cohn explains.

“The # 1 problem we’re seeing is incomplete applications,” says Rob Beall, senior loan officer at the Private Bank of Decatur in Decatur, Georgia. “The more information the lender gets, the more he can help the applicant.”

Layer. White lies are known not to hurt anyone, but in this case, they can hurt the borrower.

“I see this happening often,” says Tayne. “It goes back to the days of reported income where people just said what they earned but didn’t have to show proof, so often the income was overestimated. In other cases, I see people not disclosing all the debts they actually owe when filling out loan applications. “

Tayne has even seen borrowers use another family member’s social security number without the other person’s knowledge. “It eventually catches up with them and more often than not, when it comes to spouses, ends in divorce cases,” she says.

A good rule of thumb: if there is a chance that your loan could destroy your marriage, your business or send you bankrupt, you are about to make the biggest mistake of all: taking out the loan in the first place.