Co-Sign Loans: Ask Your Friend or Relative To Back You Up
Richard Rives
March 08, 2009
Sometimes due to bad credit or income shortage, you must obtain the aid of a third party in order to get approved for a personal or secured loan. However, co-signing a loan has several implications that tend to scare people away from committing to such contracts and agreements. Those who need the aid of a co-signer for loan approval usually resort to friends and family members that feel compelled to help but doubt about such important commitments. It is thus advisable to make things clear and to ask for the aid of a co-signer only under the right circumstances:
Certainties, Certainties Are Needed
Bear in mind that you are not only risking your personal finances and credit, by applying with the aid of a third party you are risking theirs too. Therefore, make sure that you will be able to repay the loan and make sure that you will be able to do so in a timely manner. A single missed or even late payment will damage both your credit and theirs too.
Unexpected things can happen and do happen more often than one may wish. Therefore, make sure also that the co-signer will be able to repay the loan if for any reason you fail to do so. That is the responsibility that the co-signer is taking by signing the loan contract along with you and thus, he should budget knowing that the possibility of incurring in your debt payments can come true.
Consider Collateral Instead of a Co-signer
If you can offer a property as collateral instead of forcing someone to take your place in case you fail to repay a loan, you will probably be better off. This is due to the fact that lenders feel more secure when the loan repayment is backed up with a property than when it is secured by another person even if the other personīs credit report is impeccable.
Moreover, the terms that you will be able to obtain through a secured personal loan are probably significantly more advantageous than the ones you can obtain by applying for an unsecured loan with the aid of someone else.
Contact the Lender Informally
Try to get in touch with a representative and ask for alternatives to co-signing. There may be a solution to your funding needs that does not require this condition. Maybe by slightly reducing the amount of money you borrow you could get approved on your own. Or maybe, by agreeing to a slightly higher interest rate you could avoid the requisite too. In any case, you lose nothing by asking and you can save yourself a lot of troubles simply by doing so.
Remember that by asking someone close to you to back you up on a loan request, you are not only risking both yours and his or her pocket but also the relationship that you have built with that person. As sad as it is, most discussions and fights are related to money issues and therefore, avoiding this subject tends to preserve family relationships and friendships too. But if you have no other choice, just make sure that everything is clear and both parties know exactly what they are getting into.
Certainties, Certainties Are Needed
Bear in mind that you are not only risking your personal finances and credit, by applying with the aid of a third party you are risking theirs too. Therefore, make sure that you will be able to repay the loan and make sure that you will be able to do so in a timely manner. A single missed or even late payment will damage both your credit and theirs too.
Unexpected things can happen and do happen more often than one may wish. Therefore, make sure also that the co-signer will be able to repay the loan if for any reason you fail to do so. That is the responsibility that the co-signer is taking by signing the loan contract along with you and thus, he should budget knowing that the possibility of incurring in your debt payments can come true.
Consider Collateral Instead of a Co-signer
If you can offer a property as collateral instead of forcing someone to take your place in case you fail to repay a loan, you will probably be better off. This is due to the fact that lenders feel more secure when the loan repayment is backed up with a property than when it is secured by another person even if the other personīs credit report is impeccable.
Moreover, the terms that you will be able to obtain through a secured personal loan are probably significantly more advantageous than the ones you can obtain by applying for an unsecured loan with the aid of someone else.
Contact the Lender Informally
Try to get in touch with a representative and ask for alternatives to co-signing. There may be a solution to your funding needs that does not require this condition. Maybe by slightly reducing the amount of money you borrow you could get approved on your own. Or maybe, by agreeing to a slightly higher interest rate you could avoid the requisite too. In any case, you lose nothing by asking and you can save yourself a lot of troubles simply by doing so.
Remember that by asking someone close to you to back you up on a loan request, you are not only risking both yours and his or her pocket but also the relationship that you have built with that person. As sad as it is, most discussions and fights are related to money issues and therefore, avoiding this subject tends to preserve family relationships and friendships too. But if you have no other choice, just make sure that everything is clear and both parties know exactly what they are getting into.