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FOR THE LOVE OF MONEY: Fresh Azimiz Part 1
By Shannon King Nash, Esq., CPA
*I've been dying to do a column called "Fresh Azimiz" (Bow Wow, 2006), but I refused to do so until I could actually say the whole thing five times straight (after all, butchering the English language takes a while to master). I also wasn't exactly sure what it meant. Just as I started to "study" its meaning (thanks to google), along came Lil' Romeo with, of course, an "answer" song. Lil' Romeo on his, "U Can't Shine Like Me," responds to Bow Wow saying "You Know Who Im Iz." Great. Now I had to start all over again with my ebonics lesson.
What I did appreciate from this battle, was the spirit of using words and not violence to defend one's rep. It reminded me of the now legendary MC battles back in the day. There was UTFO's "Roxanne Roxanne" (1984), and the response by Roxanne Shante, called "Roxanne's Revenge." Did we ever figure out who was the "real" Roxanne?
And who could forget, Kool Moe Dee dissin LL Cool J on "How Ya Like Me Now" (1987) and LL' s response in "Jack the Ripper." LL has, perhaps, gotten the best revenge ever by becoming a huge television and movie star, and proving that he can reinvent his music some twenty years later; "Head Sprung," was the jam in 2004.
You didn't need a dictionary to figure out what these rappers were saying. In the spirit of the old school rap battles, over the next two weeks, I'm giving you a finance lesson, that is Fresh Asimiz. I'm focusing on co-signing a loan for friends and family members.
Let me be clear by what I mean here. There are many good reasons to help people when they are down (it's certainly the Christian thing to do); but, make sure you really "know" the person you’re helping, and be confident that they will come through on their promises. In many instances, everything will work out for the best. You will give them your good credit and they will come through on the payments. Everybody is happy in this situation.
Then, there's the flip side: People who will approach you for material things, just so they can be as Fresh Azimiz. And like the preacher says…you know the story. If you just sign for me, I promise I'll pay everything. I really "need" that BMW or I really "need" that condo. I've got one word "Hell-To-The-Naw." Yes, the way Whitney says it qualifies as a single word.
If you co-sign for the wrong person, here's what’s going to happen - friend borrows from friend, borrowing friend doesn’t pay on loan, lending friend’s credit gets ruined, and the great friendship is over. If you decide to co-sign on a loan for a friend or family member, follow these 5 tips.
1. Get the Paperwork and Ask For Your Rights.
Keep copies of all the loan paperwork, so if you need to contact the lender for payment arrangements, you can do so (see tip #2). In particular, look for the terms of the loan, such as the payment amount, length of the loan, and interest charges.
Make sure to ask the lender to include provisions in the loan agreement that require them to notify you if your friend misses a payment. Remember, the lender can often come after you, first, for the money, without even going to your friend. It is your debt; not half your debt, but all your debt. They can sue you, file a lien against your property, try and garnish your wages, and, basically, ruin your credit. So, if your friend is missing payments, you want to be notified before things get out of control.
Also, try to see if the lender will agree to only hold you responsible for the original amount borrowed, or the principal amount of the loan. That way, if your friend defaults and the lender tacks on attorney fees and related costs to collect the debt, you won't be liable for them.
Finally, ask to be named as co-owner of the property (i.e., the car, house, etc.). As a co-owner you will have to be consulted before the property is sold.
2. Put some savings aside to cover the loan.
You signed on the dotted line, so it IS your loan. Unfortunately, it may come down to you paying off the loan to protect your credit. Remember, you will need to pay off the entire loan. If you wind up making a "deal" with the creditor to pay off some of the loan, the amount that you aren't paying will create discharge of indebtedness income for you. This means that you will probably receive a Form 1099-C Cancellation of Debt for the amount you didn't pay. You may have to include that amount in your income when figuring out your taxes. Also, this settlement may effect your credit score. Translation: By making a settlement with the creditor, you may still get negative marks on your credit report and have extra taxes; say it ain't so.
***
Remember, co-signing is a big deal. You could wind up ruining your own credit trying to help a friend with a debt. If you do agree to co-sign, stay on top of the debt and make sure you can pay it off yourself. Better out of a little money than bad credit, that can prevent you from buying your own dream car, house, or even paying for your child's education. Stay tuned next week for 3 more tips.
Shannon King Nash is the author of the award-winning book entitled, "For the Love of Money: The 411 to Taking Control of Your Taxes and Building Your Net Worth." She uses song lyrics and entertaining stories ripped from the headlines to teach readers how to manage their finances and taxes. Shannon is a CPA, Tax Attorney, and regular expert commentator on KJLH FM Radio in Los Angeles, and has appeared on national television. Contact the Nash Management Group at 818-986-2665, or visit www.nashgroup-usa.com.
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