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The following post is by MPFJ staff writer Travis.?Travis is a customer blogger for CareOne DebtRelief Services, and also appears weekly at Enemy of Debt.?Travis candidly shares his personal journey to pay off $109,000 of credit card debt and the tips he's learned along the way. As a father and husband, he provides a unique perspective on balancing debt, finances, and family.
I saw the following Facebook status update from an in-law of mine the other day:
If you're a homeowner, and understand fully the process by which your mortgage payment is calculated, you know that your lender can't just decide to arbitrarily raise your monthly payment.? I gently questioned my in-law to determine the reason for the increase.
Me: How can that be?? A bank can't just decide to raise their house payment, can they? Him: Idk, all I know is the value of my house went down, but my payment went up.Ah, now we're getting somewhere.? It turns out that even though the value of his home went down, due to actions by his city counsel, his property taxes went up.? This caused an increase in his monthly mortgage payment since his bank rolls an amount for property taxes into his monthly payment.
He had been so enraged at the increase that he was ready to sell his house or refinance with a different bank.?
Only, it wasn't the bank's fault.
I'm sure there are many readers that are gasping in awe of his lack of understanding.? But, the thing that pops into my head is something an elementary school teacher once said to me:
?If one person has a question, most likely they aren't the only one.?
Every day, there may be people that sign not only mortgages, but car loan, personal loan, and even student loan papers without fully understanding what they are getting themselves into.?? If I were a lender, that would scare me.? I would want to ensure that anyone I loaned money to fully understood the process, their role in that process, along with all the terms and conditions of the loan.???
I would want them to obtain a borrower's license.We require people to become educated, pass an exam, and obtain a license for many everyday privileges, including operating a motor vehicle.? Why not for borrowing money?? Similar to a motor vehicle license, there could be different classes of licenses for different kinds of loans.
Want to get a credit card?? Show me your Class A borrower's license.
Thinking of buying a house?? Sorry, you need a Class C license to qualify for a mortgage.
While having a borrower's license certainly wouldn't guarantee smooth sailing through the entire life of the loan, it would accomplish several very important things:
1.)??? The lender is assured that the borrower has an understanding of what they're getting themselves into.
2.)??? The borrower is fully informed, and can make an educated decision as to whether the loan is really the right choice.
3.)??? Help avoid disgruntled customers who may take unnecessary actions due to misunderstanding such as what almost happened in my in-law's case.
I'm all for increased financial education in the classroom, and I certainly support parents teaching their children good financial habits.? But in my opinion, even both of them combined aren't enough.? Even if a high school senior learns the intricacies of a mortgage in a class, those concepts may become rather fuzzy when he buys his first home ten years later.
By requiring borrowers to learn, be tested, and obtain a license before qualifying for a loan, we can help borrowers make intelligent decisions about their money, and increase the success rate of loans for lenders.
What do you think?? Do you think requiring a ?Borrower's License? would help people make better financial decisions when applying for loans?
***Photo courtesy of?http://www.freedigitalphotos.net/images/Finance_g198-Person_Siging_On_Loan_Application_p40358.htmlSource: http://www.mypersonalfinancejourney.com/2012/10/license-to-receive-loans.html
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