What You Need to Know Before You Cosign a Loan!

You may be tempted to cosign a loan for a child, family member or friend to help them get a better interest rate on a line of credit or loan.

Certainly this is a big help to someone who cannot get credit on their own. However, it will also result in you ultimately taking on responsibility for it. Understanding the repercussions of cosigning a loan will help you decide if it’s really the best decision for you.

The main advantage to cosigning is that you can help someone else get the credit he or she needs. Know that this loan you sign for will appear on your credit as well as theirs. It will also have an impact on both of your credit scores – good or bad. The loan could also alter your debt-to-income ratio. This means even though you are not primarily responsible for the payments, your credit report will reflect the fact that you are a co-borrower or cosigner.

It is essential that you trust the person who you are cosigning for. Also understand that even if they are trustworthy, unforeseen circumstances such as death, serious illness, or job loss can happen to anyone. You must accept the fact that you may become responsible for the loan at some point. If the main borrower defaults, the creditor can come to you for payment. This means you could be in danger of having your bank account frozen, your wages garnished, and your credit score lowered because of this defaulted loan. Failure to pay by you or the borrower can even result in collection activity, including lawsuits. If this happens to you, consider speaking to an attorney who specializes in debt solutions to help determine your options.

Note that while some loans do allow you to remove yourself as a cosigner, this is usually a lengthy process. One can usually not be removed unless they have been on the loan for a while and the borrower is making regular payments towards it. Before you cosign, have a discussion with the borrower. Discuss their plans to ensure their ability to repay for the entire term of the loan.

Share on FacebookShare on Google+Tweet about this on TwitterPin on PinterestShare on LinkedIn

Leave a Reply

Your email address will not be published.

Call Us Now to Get Started

(866) 890-7337

What People Have to Say

I just wanted to thank your entire staff at The Law Offices of Leslie H. Tayne, for helping me get out of debt. If it wasn’t for your firm, I would have never been able to resolve my $13k worth of debt in less than 3 years. Your staff did a great job, I was finally able to buy myself a brand new car without using a cosigner. I can’t tell you again how happy I am. I would recommend your services to anyone.

L.C. Client 2007-2009

I sleep like a baby at night now because of the work that you and your office have done. Rest assured that I will refer anyone I know to your office with conditions that are similarly circumstanced.

R.S. Client 2012-2014

You have been very helpful at first directing me in the right direction when I had no clue how to go about handling everything, I really appreciated all your advice and help and hope we can work something out. Thanks again for all your help and kind words, and patience.

D.M. Client 2009-2012