A friend shared with me recently that he had had several people in the past mad at him because he wouldn't co-sign a loan for them. He just couldn't get them to understand that if the bank thought they were a bad risk, then he did too.
Personally, I don't co-sign loans I feel the same way this commenter to my post Don't Co-Sign a Loan Unless You're Ready to Pay It states it:
In the banking industry there is a commonly used synonym for a cosigner: "Idiot with a pen."
And Bankrate gives us this same message in a different form -- courtesy of the FTC's Facts for Consumer Publication titled "Cosigning a Loan":
When you're asked to co-sign, you're being asked to take a risk that a professional lender won't take. If the borrower met the criteria, the lender wouldn't require a co-signer.
Yep. Remember this post if someone asks you to co-sign a loan. Unless you are willing to pay off the debt completely for the people, simply DON'T CO-SIGN A LOAN.
I think that this can vary a bit. While someone with almost no credit history may be a poor credit risk to the bank, someone who knows the person well may be better able to assess the risk. The most obvious example could be a parent or a sibling signing for some just entering the working world.
Posted by: Duncan | August 24, 2007 at 01:44 PM
I had to get a cosigner for my $8,000 car , but was able to get a $110,000 mortgage on my own. Go figure.
Posted by: cory | August 24, 2007 at 02:00 PM
I co-signed for my fiancee on her car because her credit was less than stellar back in the day. I think there are a few exceptions, but not many that I can think of.
Posted by: David | August 24, 2007 at 02:01 PM
The risk lenders assign to a house is less than they assign to a car - after all it's hard to drive away with your house!
I too have a no cosigning policy - and boy was my wife mad when she couldn't get that new car :)
Posted by: Matt | August 24, 2007 at 02:36 PM
There are only a few instances where co-signing makes sense; offspring with no prior credit record, or helping a well-known person (fiancee, sibling, or other close relation) when they're recovering from bad credit or beginning their credit history. Other than those examples, though, I think you're absolutely right to not co-sign.
Posted by: GeekMan | August 24, 2007 at 03:46 PM
A friend was in dire need of cash, well, an ex. She bought a car, and wanted me to cosign, I said no. Then somehow she bought the car and needed money for the insurance, she constantly called asking for money saying how desperate she was, I gave her $1100. I wanted to just say NO, but since she needed the car to go to work and make $$$, I say i'll just help someone out. May not get the money back...but...sometimes it's hard if someone really needed the money for something "good".
Posted by: Was I a sucker? | August 24, 2007 at 04:19 PM
How do student loans fit into this scenario? Most students do not have the credit or the money to afford college, so should parents cosign student loans?
Posted by: daub815 | August 24, 2007 at 06:18 PM
The bible sums it up. It is called "surity" in the KJV. DON'T.
If you are asked to co-sign for someone then that person is trying to swindle you or they are trying to buy something they cannot afford.
Posted by: TOM | February 18, 2008 at 06:43 AM