10 Things to Consider Before Co-Signing a Loan for Someone
As an adult, there may come a time when someone with bad or no credit may ask you to co-sign for a loan. This is often the case when your children get grown and apply for financing. Putting your name down on a loan as a co-signer comes with risk so think carefully before you sign.
- Things to Consider Before Co-Signing – Understand the dangers and risks. When you co-sign for a loan, you are saying that you will take the responsibility for it if the other person defaults on it. Not only could this jeopardize your own credit and finances, it could also ruin a relationship with friends and family members.
- Co-Signing Other Loans – It goes down on your credit history as co-signer. Your credit report will show what you co-signed for, the amount of the debt, and loan status. Even if the other person continues to make all of the payments, it could still affect your ability to borrow in the future.
- Dangers of Co-Signing a Home Loan – There is a reason your friend or family has bad credit. Having bad credit means that they have had trouble paying their other bills. So if they are unable to pay for what they already have, then chances are good that they will be unable to pay for what they want.
- Getting Out of a Co-Signed Car Loan – Try to get them to refinance by themselves. After the person you co-signed for has been making payments on their own for awhile and built up some credit, ask them to try to refinance the loan themselves. This will mean that your name gets taken off the loan and your credit will no longer be in jeopardy.
- Should I Co-Sign a Loan – Try helping them budget. Instead of co-signing a loan for someone, try sitting down and help them work out a simple budget that will help them save money. If they learn some skills in money management, then they may not need a loan after all.
- Before Co-Signing – Be careful who you co-sign for. If you feel that you must, you should only co-sign for your own children or very, very good friends. Never co-sign for an acquaintance who just happens to be a nice person or a girlfriend or boyfriend.
- Use Caution When Co-Signing – It could affect your interest rates. If you have co-signed a loan for someone, and they are late on their payments, your own creditors may see you as a risk. If this happens, they could decide to increase your interest rate.
- Co-Signing Can Keep You From Getting a Loan – Co-signing can affect your borrowing ability. If you have co-signed a loan and are thinking about getting a loan for yourself, then you need to check your credit availability. If you have spent more than 30% of your available credit, then you should consider paying off some of your debt before getting another loan.
- Co-Signing Is Not Co-Buying -You are not a co-buyer. Even if you co-sign for a loan, you are not a partial owner for whatever the loan bought. You do not get to drive the car or live in the nice, new house.
- Try limiting your risk when you co-sign. If that friend or family can only get approved for a partial loan instead of the amount that they want or need, encourage them to get that loan. Then you could get a separate loan for the rest of the amount instead of being liable for the whole amount.
This entry was posted on Tuesday, August 4th, 2009 at 7:00 am and is filed under Personal Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.