SHOULD I CO-SIGN A LOAN
If a family member or friend expresses the need
for help, it is natural to want to assist them. However, if someone
you know asks you to
co-sign a loan
for them, think twice before you do so. Co-signing a loan for
someone is risky because in the event that they do not pay, not only
are you on the hook for the payments but you also run the risk of
having your credit damaged.
Analyze the situation before you make a final
Don't look over the fact that regardless of who you are trying to
help, you are committing your financial well being and future to
theirs if you decide to co-sign a loan for them. The loan will not
only show up on your credit report as though you are the borrower,
you will be responsible for the entire owed amount in the event that
loan is defaulted. Therefore, take the decision of co-signing a loan
extremely seriously and cautiously.
Questions to ask yourself before becoming a loan co-signor:
- Will I be able to afford the loan payments if the applicant goes
- What are the chances that they will indeed default on the loan?
- How is my credit going to effected as a result of being a loan
- Am I going to need to borrow money myself anytime soon? How will
co-signing this loan affect my chances for approval when I need to
If you can grasp the fact that you are going to be responsible for
the loan if it is defaulted, you should be able to make a
knowledgeable decision. Being a loan co-signer is not for everyone
and really can be a
You need to be comfortable doing so. Never allow anyone to make you
feel guilty into becoming their co-signer.
What negative things can happen to me as a loan cosigner?
You can be sued by the creditor if the loan is defaulted. Even
if payments are late, the creditor/lender can contact you for
collecting money. In fact, they will likely contact you first before
they contact the actual borrower! In the lender's attempt to
collect, they have the right to garnish your wages and even seize
More things to consider...
You may think that you are helping the person you are co-signing
get their credit back on track. However, people with bad credit
utilizing a co-signer for a loan are likely going to be required to
use a co-signer in the future if applying for additional financing.
Therefore, by co-signing their loan, you are likely going to make it
harder for them to achieve approval on their own in the future.
No matter what decision you make, don't feel bad about hurting
anyone's feeling and definitely don't be pressured into doing
something you do not want to. Just be smart.
Why You Should Never Co-Sign a Loan
Should You Co-Sign a Loan?
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