Read This Before You Co-Sign For A Loan!

By Terry Lowery

It happens every day of the year; a friend, who has had some
problems with their own credit, wants to buy a new car, or
perhaps some furniture for their apartment. The problem is that
they don’t have the cash do it, and because of their poor credit
report, can’t get the approval that they need. They approach
their friend and ask if they would be willing to co-sign the
loan. “I only need your signature to get approved,” they say.
“You won’t have to do anything else!”

Wait!

Before you co-sign that loan, there are some things you should
know. In reality, it isn’t merely signing the loan application,
but a serious proposition. What’s more, if things went wrong and
the friend couldn’t keep up with the payments, guess who would
be responsible for the loan balance? That’s right—you.

If you are thinking about co-signing a loan for a friend or
family member, why not first read the following in order to
understand what you’re about to get into.

Risk

If someone is asking you to co-sign a loan that means that the
professional lender is not willing to take a risk on them. In
other words, their past credit behavior has been so bad that
they lender doesn’t believe they will pay back the loan. What
makes you so sure they will?

Responsibility

By placing your signature in the co-signers spot, you are
guaranteeing that if your friend doesn’t make the payments, you
will. Do you have the finances to cover the loan if it came down
to that? Do you really need another car payment?

Credit Report

You’ve obviously worked hard to keep your credit report
spotless, which is why your friend wants it represented on his
credit application, but did you know that if your friend misses
a payment or becomes delinquent with his payments, that it could
affect your credit report?

Collections

If the account does go into the collection process, it is
possible that the lender could bypass your friend (who they
never believed would pay the loan) and come after you first.
This is true in most states, and it would be important to find
out where your own state stands on this policy.

In addition, you should be aware that by co-sign on a loan for
$10,000, you may actually reduce the amount of credit you will
be able to get yourself because that loan will count toward
your “total debt owed.”

If you do decide to co-sign for a loan, there are some steps
that you should take in order to protect yourself.

First, you should ask to be notified in writing if your friend
misses or is late with a payment. By knowing of any problems
early on, it will help you keep the potential damage to your
own credit report from getting out of control.

Next, you should also get copies of all loan documents and
repay schedules. Ask for a copy of everything that your friend
gets in case there is ever a dispute, you will know what legal
rights you have.

Co-signing for a loan is serious business, and is something
that you should think long and hard about. Even if it’s your
dearest friend who is asking, you have to ask yourself if they
defaulted on the loan, what would that do to your friendship?

About the Author: This article provided courtesy of
http://www.business-grant-guide.com

Source: http://www.isnare.com