Being a Co-signer on a Personal Loan

Being a co-signer on a individualized loan for a friend or family member is a very generous offer as it will likely mean the difference between them being healthy to remember for such a loan and not being eligible. However, the decision of being a co-signer for a individualized loan should not be prefabricated lighter. It is the responsibility of potential co-signers to educate themselves about how this situation affects them, especially with regard to their responsibility to the loan should the borrower default.

Most co-signers don’t realize that this loan is going to show up on their credit report. Keep in mind that this might affect your ability to get your own loan down the road as the individualized loan you co-signed on with by used to calculate your debt to income ratio. It can also affect the interest rate you get your own loans at. If you feel it is a good intent to co-sign a individualized loan for a friend or family member, do so with the understanding that after a set amount of making on time payments the borrower will attempt to redo the loan under their own study only. The more money you co-sign for, the longer you can expect to be a part of that loan.

Since the loan can both positively and negatively impact the credit rating of the co-signer it is important to set the loan up so that they co-signer can access the statement information. This will allow you to find out what has been paid on the loan and what is still owed. Make sure the lender will inform you of any late payments or non-payment issues with the borrower as soon as they happen. Too often co-signers aren’t aware there was an issue with the loan until it has already impacted their credit.

While co-signing a loan for a friend or family member can help them, be aware of how it will affect not only your credit but your relationship as well. Nothing can sour relationships faster than money issues. It is important for a co-signer to look at the circumstances that lead to the individual needing one in the first place. If it comes down to simple money mismanagement, then you aren’t doing them or yourself any favors. However, it is the result of circumstances they had no control over you may want to consider it.

To minimize your risk as a co-signer, don’t make it usage of offering to do so for friends and family. The word will spread like wildfire with more requests heading your direction. If you don’t feel your own credit and finances can’t hold up if the borrower doesn’t repay the loan, then do not co-sign for a individualized loan. It can be difficult to say no, but it is important you are healthy to.

You might consider having the borrower wage your with verification that payments are being prefabricated including regular statements or cancelled checks. To further reduce your risk as a co-signer insist the borrower purchases individualized loan insurance that can cover loan payments for a particular amount of time due to unemployment, illness, or death.

Co-signing a individualized loan for someone is more than giving your signature. You are putting your financial history and worthiness on the line for that person. It is important that you carefully review the borrowers need for the money as well as their spending patterns. If they owe other people money or continually live beyond their means, achievement away with a clear conscious. There are times that being a co-signer on a individualized loan is the right thing to do. Only you can make that decision. If you decide to go forward with it make sure you can afford the cost of any missed payments and that the lender is going to keep you informed on the payment position on the individualized loan.