Your friend needs a car loan but cannot get one without a co-signer and has asked you to co-sign. Co-signing is the only way your friend would be able to get the loan but from your standpoint is it a good idea? Co-signing on any type of loan is a serious matter you should not take lightly. The moment you sign on the dotted line you are legally responsible for the loan repayment if your friend neglects to make the payments. Additionally, this loan will show up on your credit report and should your friend make several late payments your credit will be negatively impacted. If the loan goes into default, you will likely be responsible for repaying the balance of the loan.
If you do decide to help your friend by co-signing make sure your friend is trustworthy and understands his or her responsibility concerning the loan. You will be associated with your friend during the length of the loan therefore you should know your friend well. Co-signing for an individual you do not know well is potentially inviting trouble which could haunt you for many years should your friend default on the loan.
Also, before you consider co-signing, you need to ask yourself if you would be able to make the payments should your friend neglect to make them. Remember, you signed you were backing your friend and if he or she does not make the payments you will have to pick up the slack and make the payments. Once you have co-signed it is difficult if not impossible to remove yourself as co-signer on a loan.
Another thing you need to consider before co-signing is the strength of your friendship. If you notice a late payment, will it survive if you have to call your friend to discuss the situation? But if you are unwilling to co-sign, how will your friend react and what damage will be done to your friendship? Wow! What a quandary! If you are ever placed in this situation, only you can determine your friend’s intentions toward fulfilling the loan obligations. You definitely need to carefully consider the consequences of co-signing and calculating whether you would be able to make the payments should the need arise.
Submitted by Kathryn Shrader
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