The Dangers of Co-Signing a Loan, Mortgage, or Credit Card
What Are The Dangers of Co-Signing Any Debt?
Co-signing happens quite often in the world of loans and finance.
It is a way for someone who has very good credit to help someone who is struggling with their finances.
The practice is very good amongst close friends and family members, as it requires a lot of trust.
If you ask a group of people how they feel about co-signing, you may find that the response is mixed.
The main reason for this is because not a lot of people understand what co-signing entails.
What does Co-Signing Mean?
If you were to co-sign a loan then this would mean that you help another person who is unable to get a loan, get a loan.
You will be putting your credit history and your name down on someone else’s loan and you will be responsible for it- in the same way you would be responsible for your own loan.
Past financial mistakes or even bad credit scores mean that sometimes, people struggle to take out a loan.
In this situation, a co-signer would come in.
They would use their “good” credit score to balance out the other bad score.
Why Co-Signing is Dangerous and Should be Avoided
Co-signing can be dangerous, and a bad decision overall.
If you want to find out more about that then take a look below.
You’ll get No Material Reward
This is one of the main reasons why co-signing for a loan is bad.
You will get absolutely no material reward for co-signing.
You won’t be able to drive the new car that the other person has, and you won’t be able to pick up the keys for a new property.
The main issue here is if the other person cannot afford the payments.
If the person you’re co-signing for is unable to make a payment then it will be up to you to pay it, and you’ll be in even more debt as a result.
You Could Be Entirely Responsible for the Loan
If you decide to co-sign a loan with someone then you are the only reason why they are able to take the loan out.
If the payments stop being made, then you will be held legally responsible.
Sure, you might not think that it is going to come to this but it absolutely might because the other person has a bad credit score for a reason.
You Could be Rejected for a Loan
Co-signing a loan could make it impossible for you to get a loan at a later date.
Think about it, you might not think that you are going to need a car in the future but when the time comes, you never truly know how you are going to be affected.
You’ll Have to Make the Payments
If you co-sign a loan, then you need to be aware that the time may come when you need to make the payments yourself.
You won’t be able to relax and take back control of your finances until the loan has been paid.