Why You Should Never Cosign Loans

cosigningIf you have a friend or family member that’s struggling financially or considering bankruptcy, they might be in need of a loan. Lenders, of course, can be rather reluctant to grant loans to people who don’t show financial security.

So, in order to still offer the loan (but without the huge financial risk), the lender asks for a cosigner to put their name on the loan.

Why These Loans Are Bad

As much as you may care about your friend or family member that is in need of the loan, you should avoid being a part of this deal at all costs.  Essentially, when this person defaults on their loans, you are fully responsible for paying off the loan. Even the most financially stable person has been brought down by their responsibility as a cosigner on someone elses loan.

If the loans are too risky for the lender to give without a cosigner, they’re too risky for you to be involved in.  If you feel that you absolutely must help this person out financially, think about granting them the loan yourself.  That way, if they fail to make their payments at least you’re only out the amount of money they borrowed.  If you had cosigned, you would be out-of-pocket for that money, plus the interest that is owed to the lender!

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