Expert Financial Advice
My daughter wants to buy a car and have me co-sign for it. She has a job and shares an apartment with her friend. I want to help her out, but I’m not sure if this is the way to do it.
It has been said that a co-signer is best defined as a saint, an idiot, or a parent. A co-signer for an application is needed when an applicant is unable to get a credit card, apartment lease, or auto loan based solely on the borrowerÕs credit.
One who co-signs the document is not ‘just’ a co-signer. Everyone who signs is 100% responsible for the loan, regardless of who signs first. The payment history shows up on the credit record of both signers.
Co-signers are obligated to make the payments, whether they are the borrowers or not. In fact, they are liable for every dollar of the debt they sign for.
Concerning signing for others loans, Proverbs 17:18 says, “It is poor judgment to countersign another’s note, to become responsible for his debts” (Living Bible).
In many states, lenders do not need to notify the co-signers when a borrower falls behind on loan payments or exceeds the credit limit. Consequently, co-signers can be liable for late payments as well as penalties, without being aware there ever was a problem. They may even be expected to pay immediately, in cash.
Copyright 2012 Deborah Nayrocker. All rights reserved. Permission to reprint required.
Deborah Nayrocker writes on personal money management topics, showing others how to take control of their financial future. An award-winning writer, she is a guest contributor with www.CBN.com and a finance columnist with www.Crosswalk.com.
Deborah is the author of The Art of Debt-Free Living and the Bible study Living a Balanced Financial Life. Her Web site is www.artofdebt-freeliving.com.
If you have a financially-related question that you would like to ask Deborah, click here.