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September 02, 2012


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What? She "can't remember" whether she volunteered or was asked to cosign on a loan for hundreds of thousands of dollars? It doesn't occur to her that this move could pose some problems? She notices that her "friend" has been welshing on the debt only after the payments are three months in arrears? It never occurs to her to check her own credit history?

There's no series of mistakes here. There's only one mistake: Not paying attention.

Its amazing that banks and other financial institutions specialize in determining the credit worthiness of a potential customer and deny credit applications all the time. Yet friends, family and acquaintances "take a leap of faith" and put their own financial lives on the line all the time.

That is awful. At one point, a cousin asked me to cosign for her on a car loan. I was put in an awkward situation. I did not cosign and I am glad to this day.

I completely agree that you shouldn't co-sign anything. It will destroy relationships if things go wrong and if you let the person down right they should understand. There is a reason the bank won't give them a loan and chances are they don't really need it anyway.

We co-signed for our daughter when she bought her first home. She lived in it for several years and then when she moved and bought another home she no longer needed us to co-sign. Her story had a happy ending.

She consigned on a house??? Nuts! I will not cosign for anyone because if you jacked up your own credit why would you care about taking care of mine? You just never know how life can change and impact a person's ability to repay their debts or your ability to pay back what you cosigned.

There are some happy endings to cosigning but I believe those are the minority, certainly not the norm. I also say no to co-signing on anyone's loan. If I'm asked to cosign that is always a red flag for me on thier ability (or lack of ability) to make the payment on their own.

Great points made!

I hate the term "co-sign". Let's call it what it is: you are getting a loan on someone else's behalf, because they can't qualify for it.

The only circumstance in which you should co-sign is if you're willing to pay off the loan entirely, and you are willing to stay on top of it to make sure it does get paid off.

The only way I'd do it is if it was for my own child, in a circumstance where I'd be willing to gift them the money.

A few years back, my then-future Brother-in-Law asked me to cosign on a car for him. He's a very nice guy, he'd helped us with some various things, and I really did want to help him out. However, he also is notoriously bad with money and has trouble keeping a job. I could have absorbed the loss if he had defaulted, but it wouldn't have been easy. I thought it over, prayed about it (I felt confirmation that I should not do it), and refused cosigning. It was a little awkward, and I wish I could have been in a situation to help, but it was the right decision. He was fired from his job a few months later and I would have been on the hook for his debt.

On the other side, my dad co-signed for my first car. The difference there is that I'm very good with money, had a pristine credit history, but didn't have the work history that they wanted (plus my dad could have easily paid it off had I defaulted). I might someday cosign for my kids on something like that, but only if they'be shown me that they are responsible and unlikely to make me regret my choice. I wholeheartedly agree with not cosigning in any other situation.

Co-signing a loan, especially a mortgage for someone, is a terrible idea. I would never co-sign for friends or family. It's a perfect way to lose them. I co-signed only once for my son's car after his graduation since he did not have enough credit history. It worked out ok. Thanks for sharing your story! It's a good lesson for everyone!

I agree that anytime you co-sign, you should be ready to take on the loan if it defaults. That means that co-signing with a really close friend or a family member could be a happy circumstance...only if you're close enough to weather through their financaial problems with them and communicate often.

I don't think you should ever be on the hook for someone else's bill and you should never want someone to co-sign for your bill. I've never cosigned but I have a cosigner on one of my student loans. I was about 18 at the time. I regret taking on a co-signer and I'm mad that I needed one in the first place. I have yet to default on any loan I ever had (and don't plan to) but it's a pain to have someone bother you about your loan and tell you how much or how frequently you should pay your loan. I definitely agree cosigning is never a good idea.

As a teenager, my mom cosigned for a loan for me and I didn't really know the consequences of screwing it up. As a result, there was a big strain on our relationship - she was on the hook. Now I know what the consequences are. I would never cosign for somebody!

Wow, this story is really enlightening in this area. I would never want to mix money with a friendship in any way. I think I would consider a personal loan to a friend before co-signing on something. At least that way if they don't pay you back, your credit is not impacted by their bad financial situation. The only thing I have asked someone to cosign for me is a student loan, and it was my mother.

I worked with a guy once who said he would co-sign for anything he could use. Because if you missed a payment, he was going to come get it if he's paying the debt, lol. (no, I didn't try to get him to co-sign for a loan)

On the flip side to this example, what if the person is a perfectly responsible, caring friend that would do anything to keep their word.

1 - Why would I help a someone I like go into a debt that even the loose banks are afraid is an albatross? Doesn't sound very helpful/friendly. Gift them something or don't.

2 - Financial disaster can happen to the best, most prepared people. Whoever doesn't believe this hasn't had their health insurance company deny a hospital charge for being "uncustomary or unreasonable high". Co-signing just doubled your chance the bad luck will happen to you.

You should never cosign. Lending or giving the money are better options. It's not just the willingness to take on the payments (which is what you are cosigning for, from the bank's perspective). The real problem, even if you can afford to take on the payments yourself, is that the bank is under no obligation at all to inform you if the payments are falling behind. You might not find out, like Sibylla, until the loan is already months behind. At that point your credit is trashed, and not only are you on the hook for the payments/balance going forward, but also extra interest and probably penalties. If you really want to cosign for someone, you have to insist on getting a copy of the statement, every single month. The month you don't get one, is the month that the borrower was just a little short, but was going to take care of it the following month, they swear.

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