Should you or should you not co-sign for a relative or friend?

CONSIDERING our close rela­tionship ties, it is most likely that at least once in your life you’d be asked to co-sign for a loan for a family or a friend- whether it’s for a vehicle, a mortgage, credit card, or a student loan.
While it may be tempting to help someone in “dire” need, you have to think twice before sign­ing that loan agreement. Helping a friend or relative by co-signing a loan isn’t always a good idea.
As a co-signer, you are com­mitting yourself to a financial obligation that you don’t have di­rect control of. It also adds up to your total amount of debt, which has a great probability of lower­ing your credit score. Remember, the amount of debt could greatly impact your credit score. A low credit score will make it hard to obtain a much-needed loan in the future.
Simply put in layman’s term, co-signing is the same as taking the loan out yourself. It is guar­anteeing to the creditor that your friend or relative will make the payments.
But what if the original debtor defaults on the payments? Re­member, co-signing is a way for someone with a bad credit to rely on the strength of another person’s strong credit. The same habits that would have driven that person to the point of having a bad credit could have serious financial consequences as you would be left out to pay for the debt in default.
You may think this will not happen to you because you trust your friend or relative. But stud­ies show that 3 out of 4 loans which had a co-signer go on default. That equates to 75% chance, which is way too high an odd to gamble on.
Even though it’s not the in­tention of the original debtor to “betray” you, circumstances can force them to prioritize on their budgeting and it may be that the loan you co-signed with them is not a top priority.
If that happens, the creditor will have the right and all the op­portunity to go after you since, as a guarantor of the loan, you have agreed to take over the en­tire loan if your friend or relative can’t or won’t make the payments. If uncooperative, creditor could harass you with incessant calls, file a civil lawsuit and get a judg­ment against you, and ultimately garnish your wages or put a levy on any asset you may have.
The point is, don’t co-sign and compromise your good credit. You can say no to your friend or relative and try to help in another way.

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Evangeline is a California registered tax preparer, a legal document assistant for the general public, and a freelance paralegal offering assistance to various attorneys. She can be reached at her office at 2451 Colorado Blvd. #2, Eagle Rock, CA 90041 or at her marketing location inside the Eagle Rock Plaza. Her phone number is (323)550-1869 or you can check her website at: www.evangelinegiron.net. She is a member of the court-endorsed California Association of Legal Document Assistant (CALDA) and an Associate Member (Non-attorney) of the LA County Bar Association (LACBA).

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Note: Evangeline is not an attorney nor does she provide legal advice. She is a bonded and registered Legal Document Assistant and prepares legal documents per the specific direction of clients.
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Evangeline Giron

Evangeline is a California registered tax preparer, a legal document assistant for the general public, and a freelance paralegal offering assistance to various attorneys. She is a member of the court-endorsed California Association of Legal Document Assistant (CALDA) and an Associate Member (Non-attorney) of the LA County Bar Association (LACBA).

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