Should You Co-sign On A Loan For Someone?

If you are considering co-signing on a loan for someone to help them out, you need to be very careful. There are horror stories out there from innocent people like yourself that just wanted to help out a friend or family member. As result though they ended up with a ruined relationship and damage to their own credit. If you have been able to keep your own credit on track then you should be congratulated. It can be difficult but it does pay off in the end when you are able to get the credit you need at very good terms.

Some people turn to a co-signer because they have simply been frivolous with their credit. They haven't made it a priority to repay things when they should and as a result they can't get any other credit. For others, they had every intention of repaying their loans as agreed. However, life through them some fast curve balls that made it impossible to do. A third category is those that have never had credit so there is nothing to measure them by in the eyes of a lender.

You can be sure it is never easy for someone to have to approach another individual to co-sign on a loan. While you may be flattered that they came to you, always look out for your own well being first. You certainly don't want to ruin your own credit because you have through a life boat out there to someone else. Any time you co-sign on a loan there is a risk that it won't get repaid according to the terms. That means the lender is going to be coming to you for what is owed.

Many people that will ask you to co-sign for them are only doing so because they are trapped in a desperate situation. If you take the time to help them out, you can be sure they are going to do all they can to show you how responsible they can be. They definitely don't want to you be stuck with their bill after you were so kind to help them.

Even if you have an excellent relationship with someone, nothing can ruin it faster than money. If they aren't paying the loan as they promised you will be feeling it in your heart and in your pocket book. For many individuals, this is just too high of a risk. You also will find that if you co-sign for one of your siblings or one of your children, the others are going to expect it from you as well when they need help.

Many individuals are very responsible though and they have only turned to a co-signer because they had no other choice. They are very committed to ensuring that debt gets repaid as quickly as possible. They don't want the individual that came to their rescue to be punished for doing a good deed. Make sure you take the time to really think about the issue though with your head and leave personal emotions out of it.

The best advice I can give you if you do want to be a co-signer for someone is to stay on top of the information. Work with the lender too so you can get notices of payments that have been made, the amount due, and any past due issues. You can also have the individual give you a copy of their canceled check or the money order statement so you know each payment is being made on time. They may not like doing this, but they need to understand what is on the line for you and respect it.

Some individuals just aren't comfortable co-signing on loans for anyone. This is a personal choice and it should be respected. If you don't feel confident that they individual is going to repay the loan then don't co-sign for them. If you also know you can't cover the payment, then don't do it. They may be able to pay the loan right now but that may not be the case six months from now.

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Robert Bain is fascinated by the secret credit industry. He follows personal credit related issues such as credit cards, debt relief, home owners loans, bad credit repair and scams.

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