It was Such a Stupid Move
When I was in my twenties I made the mistake of co-signing a car loan for a friend. A year later, they left town with the car. I was the easiest person to find, so the bank held me responsible.
I didn’t even have my driver’s license!
If you are asked to cosign a loan, ask a few questions before you jump in.
Why does the borrower need a co-signer?
- They have a poor credit history.
- They already have too much debt.
- They are trying to consolidate debt into one loan-they are trying to get back on track. The bank wants a cosigner because they haven’t made payments on time in the past.
- They can’t get a loan any other way.
If the bank doesn’t feel safe lending the person money, why should you?
You are allowed to say No.
You are allowed to protect your credit.
When you cosign, you take full responsibility for the loan, even though the loan is in the other person’s name.
You are not the payer of last resort. Often the bank will come after you first, especially if you are the easiest person to find, and you have a job.
If the borrower doesn’t make their payments on time, your credit rating/score will suffer and this may affect your ability to borrow money in the future.
If the person is a loved one, it will be difficult, but if you can’t afford to pay off the loan, just say no!
I realize there are some situations where you feel you must cosign. You might be married, or in a committed relationship. Your adult son or daughter might really need your help or a good friend is asking and you can’t refuse them.
In that case, go in with your eyes wide open. Be sure your name is on the title of the asset that is being offered as collateral and be fully prepared to pay the loan yourself.
Remember, no one else cares about your money as much as you do.