Cosigning alone can seem like a fairly reasonable proposition on the surface. There are a number of situations you might face where family members or friends take on loans, need cosigners, and come to you for a signature. Don’t do it! When you cosign a loan, you become responsible for the debt. If you need more reasons, keep reading.
4 Reasons Not to Cosign
- The person you cosign a loan for needs a cosigner because they have bad credit. A lender doesn’t want to lend money to this person because they have proven themselves to not be trustworthy with a loan. Why do you want to put your name down to bail this person out should they default?
- If the person you cosign for defaults, not only are you responsible for the loan, but for all late fees, charges, or collections fees that may have been accrued.
- Your credit score will be ruined. While you once were able to cosign on someone else’s loan, you now can’t even get one yourself.
- You do the borrower no favor. This person who can’t pay their own loans probably needs to learn the hard way that they have to be responsible for what they borrow. Defaulting on one loan or two most likely isn’t going to lead this person to start filing for bankruptcy. Let your family member or friend figure out financial responsibility without getting you to cosign.
Do not cosign for any loans. You put yourself at great risk by putting your name and financial information next in line when the lender comes looking for payment! Loans should only be given to those who have the ability to pay them back. If you do cosign, you should be prepared to make all payments on the loans.