What to know about co-signing a loan


Provided by State Farm

Your friend or family member wants to take out a loan — but they don’t qualify. They could, however, if someone co-signs, so they ask you. Before you jump in to help, understand how the decision potentially impacts your credit. Consider the following carefully.

What Happens When You Co-sign 

There are potential risks when co-signing a loan. You are 100% responsible for the debt. When you co-sign, you agree to pay the loan back in full — plus any late fees or collection costs — if the primary borrower defaults or misses just one payment. If you can’t pay, the lender could sue you or garnish your wages. It can lower your credit score. The primary borrower’s late or missed payments can prevent you from qualifying for personal loans or other lines of credit in the future.

Before Co-signing: Factors to Consider 

Think about the following before agreeing to co-sign a loan. Is the borrower able to make payments on time? If the primary borrower doesn’t have a steady source of income, making on-time payments may become an issue. How can you protect your credit? Ask the borrower to make any missed payments within 30 days to ensure your credit score (theirs, too) doesn’t take a hit.

Your Investment Is Key 

If you’re comfortable co-signing a loan, treat the debt like it’s your own. Set a timeline. Agree on a specific date to get your name off the account. To do this, the primary borrower must refinance the loan or close the credit card. Monitor the account. Review online statements to make sure the primary borrower is regularly making payments.

Previous Story

Waiting for normal

Next Story

It’s a pain we can do without

Latest from Business

Business Briefs, June 23

Bay Street Realty’s Bryant receives award Berkshire Hathaway HomeServices Bay Street Realty Group’s Annette Bryant was