“People don’t save up for their divorce.” How to get a “divorce loan”
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Divorce can be a one-two-sucker punch. First comes the emotional pain of breaking up a marriage, and then the financial reality of the cost. While an unchallenged divorce where all parties are agreed can cost as little as a few thousand dollars, according to a survey by Nolo.com, the costs can skyrocket when couples can’t agree. (See here the personal loan rates you might use to pay for a divorce.)
Depending on the situation, the divorce process can take a large amount of money in the form of advances to a lawyer, fees, court costs and, if applicable, disputes over custody, child support, maintenance and the division of your assets and debts can prolong the process and cause additional costs. This can easily add up to tens of thousands of dollars.
Without cash or a financial assistance system, a person may need to take out a personal loan to help them through the divorce process. Most divorce loans are personal loans which are unsecured loans which means that they do not require collateral but are lent based on your credit rating, savings and general financial history. You usually pay back the loan in monthly installments.
Depending on your situation, a personal loan can range from $ 1,500 up to $ 100,000. According to the latest data from Lending Tree, the average new personal loan is $ 6,092. In addition to paying for divorce charges, personal loans are used for debt consolidation or credit card refinancing. Interest rates can vary widely depending on creditworthiness and credit history, starting at 3% and going up to 36%. Here are the current personal loan interest rates that you may be able to pay for a divorce.
For people looking to get their bills paid on time, a personal loan might be a better option than putting all of the costs on a high-interest credit card, which can start at 16% APR. As with most loans, it is beneficial to use auto payment to repay them and not pay any late payment interest. Some personal loans incur processing fees, an additional fee for processing the loan. Loan default has a negative impact on your creditworthiness.
People can choose to take out a divorce loan when their money is tied up in assets such as a home, or when in a couple there is one person holding the wallet. And while there’s no concrete data on the number of men and women taking out personal loans or charging their credit cards with bills, experts often see a pattern in those who don’t have access to $ 5,000 to $ 50,000 or more in cash.
“Typically, once the divorce process begins, those unrelated to money in marriage do not have access to money,” said Avani Ramnani, managing director at Francis Finance, an asset management and financial advisory firm that specializes in helping women, many of whom are divorced, manage their money. “We have dealt with many cases in which the fortune of the marriage runs into the millions, but the woman depends on the kindness of others even for her daily needs like food.”
Even before the start of the divorce proceedings, the cost of living must be taken into account. “Are you really going to put a line in the middle of the house: ‘You just take this side, you take this side?’ No, that doesn’t work, “said Nicole Noonan, a marriage lawyer and divorce finance specialist at New Chapter Capital. “It is not always possible for someone to actually move out immediately. So you have to come up with a plan how you can afford it. ”
While she tends to deal with wealthier clients (her company will take on credit based on the projected outcome of the settlement), she says anyone can be caught off the beaten path financially, especially if the divorce is bitter and dragged on. “People will fight over worthless things instead of sitting down over dinner and sorting out the ten non-negotiable things they need to get out of here,” she said. “It’s the sad truth.”
How To Financially Prepare For A Divorce Before Leaving Marriage
“The most important thing is to understand the amount of the mortgage on the house. Which bank does it belong to, whose name is on it, ”said Noonan. “Make sure you have your marriage certificate, title of your house, and your passport. The more papers you have, the better prepared you are. ”
With a spouse paying the bills and owning all of the finances, now is the time to sit down every few months and get a real understanding of how much is spent on monthly bills, electricity, insurance, and all the household chores work is spent.
For those concerned about access to cash or credit, Noonan and Ramnani recommend opening credit card accounts on their own behalf and opening a bank account to keep segregated cash.
“People save for a wedding, but they don’t save for your divorce and that’s human,” she said. “Start putting away a little money here and there, cut the extras. Everyone should have a small nest egg for a rainy day. ”