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Why you shouldn't co-sign a loan

by , 28 October 2014

Have you ever been asked to co-sign a loan by a friend or family member? Co-signing is a huge decision, one that should definitely not be treated lightly.

Most financial experts recommend that you take your time to consider all the risks before saying Yes to co-signing a loan.

Here are a few reasons why you shouldn’t co-sign a loan.
 
You have no benefits, only disadvantages
 
By agreeing to be a co-signer, you are basically agreeing to be responsible for someone else’s loan. If the other person fails to pay, you will be held accountable and will have to pay yourself. Late payments, missed payments, they will all be seen on your own credit report. So even if you have very good credit before co-signing, doing this will affect your own credit score.
 
You will be sued first if payments are not made
 
As outrageous as it may seem, if you are a co-signer, you are sued before the person who actually got the loan. You will be sued in order to repay the debt.
 
You are liable to pay the entire balance
 
If something goes wrong and the payments aren’t made, the lender will ask you to pay the entire balance, not half or part of it.
 
It may be more difficult to obtain a loan later on
 
If you should wish to make a loan yourself sometime in the future, your application may very well be denied because you have too much credit already.
 
Lenders will consider this loan as being your own debt
 
It doesn’t matter if you only co-sign for someone else’s loan – it will be considered as being your own. It will impact your credit score and will put you at risk of being denied future loans or lines of credit. 

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Why you shouldn't co-sign a loan
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