Tuesday, October 6, 2015

Co-signing a Loan: Is it a Good Idea?

Any time a friend or a family member goes through hard financial times we try out best to help solve this issue and get the person out of this hole. What shall we do if we want to give a helping hand? The most common thought is to give some cash to retrieve oneself out of a financial gap. But there is another way of solving out temporary cash issues such as co-signing a loan, for example.

Most people have no idea whether it is a good option or they are not really helping out this way. Nevertheless, though it does seem as a potentially reliable option it does not mean that there are no financial hazards in a case of co-signing on a loan. Learn about the ones in this article while considering this option.
  • What is the reason for a bank to demand a co-signer from a person who is actually willing to take out a loan? Usually it means that the latter is a client with bad credit history or not credible enough to be given out a loan. That is why it is never wrong to check on the personal data of this client and go through the credit history with him/ her.
  • What about your credit score? Is it sufficiently high to apply for a loan and present yourself as a co-signer? In most cases primary borrowers are rejected at being issued a loan and that is why they try to find a guarantor - a person who will take half-responsibility of paying the personal loans off.
  • The hugest problem will be if your co-signer does not eventually pay for the part of a loan that he or she signed for. So basically you will be the one who will get charged by bank or any company that you applied to. Moreover, it will do much harm for your credit score as it will be reported. Additionally, lender has all the rights to charge your wages according to the laws of the state which citizen you are. 
  • Be careful with your credit history as in a case of delay payment or not paying off a debt at all, your credit score will be impacted as well. Do not be surprised in such situation if your credit score agency will contact you in order to get to know the details of what is going on. 

Co-signing a loan means getting a part of financial responsibility, so think it thoroughly whether you are ready to become a guarantor for one person or another. Consider how credible the applicant is. Get mentally ready for any consequences that may occur in case of a primary borrower's inability to pay a debt off. It is better to consider this loan to be yours and do not miss any payments. That is why if it is not you who needs cash, would you go for all the hazards?

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