Ask Paul B: Financial Obstacle?

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Dear Paul B,

I co-signed for two college loans for my kids. These were completed over nine years ago and both kids are meeting their financial obligations for these loans. I wouldn’t ever let them shirk their responsibilities. They are both on time and still have about six-to-nine years left on their loans. Why does a bank look down at “us” when we are taking out a loan for our dream house in Florida, which is under $165,000? This is just ridiculous, and our credit scores are 730 and 744. We are at a loss for words.



Dear NP,

Debt + Debt= DEBT. Your two PLUSES are clearly, regardless of loan amount and faithful return, a DEBT. Your lending institution(s) will see these two outstanding loans as YOUR debt, should these two loans come back to bite you both in the rear quarter. Lenders, at one time, did not consider these school loans into your debt ratio, because they were none to happy to loan you all the money you wanted. They enjoyed all that profit from the servicing fees. NOW however, they will search to find ANY potential debt that may attach itself to your income. This way, you can be charged a higher interest rate or be declined all together. The rules of “the game” have changed considerably in the past three years. Confused myself over bank loan practices, I have been a ‘Nonplusser'(as in quandary not balance sheet) for three years and counting. I believe the lenders should create a formula that reduces your risk as the school loans are closer to being paid in full. This would be a vast improvement over current evaluations. I am not privy to any of your ratios (earnings, debt, down-payment on new home,) but I do wish you good luck with your loan. Talk to at least three lenders to find the best loan.

Paul B


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