To Co-sign or Not To Co-sign...That's A Question That Can Ruin Your Credit

Many times in life we are faced with a hard decision.
Whether to co-sign or not to co-sign will be one of those hard decisions.
You have worked hard to keep your credit score high, and you have no problem
whatsoever in getting approved for a any loan or credit card that you apply
for.
Not everyone is so lucky.

What co - signing means to you, is that you are jointly responsible for the
loan or credit card that you are co-signing for. If the person you co-sign
for falls behind on the payments the creditor expects YOU to make the
payment. If the payment is not made, not only will this be a black mark on
your credit, but if the creditor decides to take legal action, they can file
against you too.

If a creditor does this to you, they can sue you for the money owed, sell
your assets, or even garnish your wages to get their money, and ruin your
credit rating in the process.

If you are considering co signing for someone, you need to think very
seriously about what the risks are. You should also ask yourself the
following 5 questions before signing on the dotted line.

1. Are you wiling to lose your assets and good credit rating by co signing?
This is a tough question because you wouldn't be considering helping someone
out if they weren't important to you, and you didn't think they were
responsible enough to make payments.

2. Why does the person need you to cosign? Think about why the person needs
you, is it because they have a really bad history for not paying their
debts? If they are young and wanting to go for their first loan, ask
yourself if they are mature enough and have the financial means to pay the
payments on time for the life of the loan. If you have any doubts about the
person, you shouldn't volunteer as a cosigner

3. Have you read the fine print of the contract carefully?
Make sure you are informed and know exactly where you stand, and what the
lender can and can't do to you. Don't think a lending institution has your
best interests at heart. Make sure that you understand the agreement
thoroughly, and don't let them push you around.

4. Ask about negotiating the terms with the lender, which may include
limiting the liability that you are responsible for to the actual amount
owed, not including penalty fees, or late charges etc. Also, make sure that
the lender will notify you if there are any late payments, that way you can
fix the problem up quickly before it ends up on your credit report, or even
worse the loan is called in by the creditor.

5. Are you able to pay the loan in full if the person you co signed for
defaults? What will happen to you if you have to find the money yourself? If
you can't afford it, don't do it, as much as you want to be helpful, some
things just aren't worth the risk.

If you have the means to cosign and are confident that everything will be
fine, before committing to the loan make sure that you have taken the time
with the borrower to explain the ramifications that will take place if they
default on the loan, and discuss how they will pay you back if this happens.
Don't forget to get everything in writing!

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Liz Roberts is a loan consultant with NHBSInc. They specialize in providing
sub prime financing. For a list of credit cards for people with bad credit
or seeking to rebuild their credit please visit our site
http://www.newhorizon.org/Info/creditbuilders.htm