Personal loans are short term debt obligations. These loans are taken out from a credit union, bank or other similar lending institution. Most personal loans are repaid within one to ten years at the most.
Most personal loans are unsecured. This means that they are not secured by any type of collateral. A lender will review a person’s current income, credit rating, credit score, debt to income ratio and other relevant factors. If approved, the lender will provide you with a contract that specifies the dollar amount and terms that they are willing to offer to you. Read this document very carefully before signing. Some loans have variable interest rates, while others have the same fixed interest rate.
There are also secured loans and personal loans that require a co-signer. Secured loans are typically backed by a house or vehicle. If you default on a secured loan, the lender can legally repossess that asset. A person who co-signs usually has a better credit history and credit rating than the person who is asking for the loan. If the loan holder doesn’t honor their commitment, the co-signer will then be liable for making the payments according to the loan contract.
What Are Personal Loans Used For?
Personal loans may help someone consolidate debt. They can also be used to acquire a car, boat, motorcycle or to finance home repair or remodeling projects. This loan type may also help people build credit.
Who Pays For Personal Loans In A Divorce?
When a divorce is requested, a court will examine all current debt. Those responsibilities will be divided into marital and non-marital debt. Only very specific types of debt incurred during the marriage are considered marital, such as the mortgage on a marital home. Loans, credit cards and other debt that began before the marriage is generally viewed as non-marital debt. However, there are some instances in which certain non-martial debt could be classified as marital debt.
Courts rarely assign one person’s debt to another party. However, a judge could transfer ownership of certain assets. For example, the deed to a home could be mandated to be transferred from one spouse’s name to the other. A judge could also require that a vehicle or house be sold in order to fulfill some of those debts. during a divorce in the state of Maryland. Courts use equitable property guidelines so that one spouse doesn’t have an unfair advantage over the other. The only exception to this rule is if doing so would be unjust to one spouse.
Many couples opt to prepare property or asset settlements themselves. Both sides will decide which items and obligations are theirs. This information will be written down and presented at the divorce proceedings. It should not be filed ahead of time. If a couple can’t decide how to divide their assets, a judge will make those determinations in a court of law.
Can Personal Loans Affect My Credit?
Every kind of loan and debt will impact a person’s credit. It’s important to make all loan payments on time. Paying off balances ahead of time can even be very beneficial in some instances. Just make sure to re-read your paperwork in case there are any penalties for paying off the balance early.
Prequalifying for a loan will not affect your credit score. Your credit score may change slightly after you have applied for a loan or credit card. Late or delinquent payments can also cause your credit score to go down. This can be true even for people who are not the original loan holders or are co-signers on their spouse’s personal loan.
If you are a co-signer or authorized user on another person’s loan, pay attention to the terms of the contract. You may be held responsible for the loan if the original owner defaults or fails to make their agreed upon payments on time.
You can inquire about removing your name from your spouse’s personal loans when obtaining a divorce. However, understand that the court cannot require a creditor to release you from an obligation that you have willingly taken on. If you remain on a loan with your ex-spouse, you could be asked to pay for those obligations should your former partner default on them. This may end up being an added expense that could result in financial obligations and could cause your credit score to decrease if those payments aren’t made on time.
Got Questions? We Can Help!
It is perfectly natural to have questions about divorce. If you are thinking about filing for divorce, give us a call. Schedule a no-obligation consultation with one of our attorneys. We’ll sit down with you and address your concerns. We can even help you prepare a property settlement agreement.