I came across a www.hope4usa.com article from a couple of years ago this afternoon that I thought was worth sharing again. Many people do not truly understand the dangers and extreme risk associated with co-signing for a friend or family member's loan. I hope that this article will help to shed a little bit of light onto the subject.
The Dangers of Co-Signing By Michelle Black
We've all been there. A friend or family member asks you to co-sign for a car loan, a home loan, or some other type of finanancing and you feel obligated to help them out. You might think that being a co-signer is not really that big of a deal since you are not the primary borrower on the account. However, the truth is that co-signing for someone else really is a big deal and not only is it a big deal, it can be detrimental to your credit as well.
When you co-sign for someone else's loan you are legally responsible for the account just like you would be if you received the loan for yourself. Plus, although you are not in control of making the monthly payments, the credit history for the account will affect your credit score. If the person you have co-signed for makes even 1 late payment on the account, your credit score could potentially drop up to 100 points!
The HOPE Program strongly recommends that our members never co-sign for a friend or family member, not even for a child. Spouses are the only people you should ever consider co-signing for and then only if 1 of you cannot qualify for the loan without the other's credit. We know that can be very hard to say "no" to a loved one, but if you make up your mind ahead of time that you will never co-sign it can help to make the situation a little easier. In fact, often times HOPE members simply tell their loved one, when they have been asked to be a co-signer, that their credit advisor has asked that they do not co-sign. Period. This helps the member not have to be the "bad guy" when faced with the request of being a co-signer for someone else's loan.
Remember, you can refer your friend or family member to the HOPE Program if they are facing credit issues. Our caring staff will be happy to help the people you care about establish the healthy credit they need so that they will be able to achieve healthy, "loan ready" credit of their own. Please call 704-499-9696 for more information on the amazing services offered by the HOPE Program.