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Why You Should Never Cosign a Loan


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TERMINOLOGY

A cosigner is also known as a surety or guarantor. Examples of where cosign loan cases occur include buying a motor vehicle, student loan and a home mortgage. Usually, you are required to sign a promissory note and you are subject to financial risk. This article will outline why you should never cosign a loan.

Responsibility

A cosigner is supposed to pay any debts that the person that you cosigned for failed to pay during a certain period of time. You are entitled for any late charges, penalties and legal fees. If you failed to pay, the lender has the right to bring up a court case against you. In some serious case, you might need to sell off your properties to pay the debt or to declare bankruptcy. All late payments will be recorded in the credit report. Debts increased based on debt-to-income ratio; can be increased up to infinite amounts.

Can you Afford it?

Please do not cosign a loan if you cannot afford to pay. You should never volunteer unless that person is a close family member like your spouse. If you cannot pay all the debts and you incur a bad credit report because of it, you may have problem requesting for any loan in the future because no banks or financial institution will see you as a trustworthy person. As a result, think carefully before you become a cosigner.