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Whatever You Do,Don't Co-sign!
Written September 2004
By Robert Ruiz
Have you ever wanted to purchase a house and was turned down by the banks because your
fico score was below 60? Did a bank ever offer you a loan, however, only under the
circumstances that you provide a co-signer. Then when you search for a co-signer, even your
own family members give you the run around. Maintaining good credit may be easy for some,
however, for others it can become a nightmare, a nightmare that Peter Ramirez cannot forget.
Peter had a friend, he knew from kindergarten which was also his next door neighbor. One
day Peter was approached by his long time friend, where he took the opportunity to tell Peter
about a dilemma he was having. Peter's friend was trying to purchase another house,
however the banks were denying him a loan unless he had a co-signer. Peter was
bewildered for a moment. However, being the good friend that he is, he agreed to co-sign.
Peter never stopped to think, why his friend was not able to get a mortgage loan on his
existing mortgage. He never bothered to ask why his friends and family members were not
able to co-sign. He never bothered to even check on his friend’s credit status. Peter based
his decision to co-sign, solely on emotions and the credibility of his friend’s sincerity.
To make a long story short, a year later Peter's friend defaulted on his loan payments. Not
once, not twice but on numerous occasions. Peter was now receiving letters and phone calls
from the banks collections department threatening to auction his assets to satisfy the loan.
Peter was now held liable for a loan on property that is not in his possession. Peter is also
being sued for the amount of the loan plus the interest, which can possibly lead to the sale of
his own house and assets.
What is happening to Peter is not an isolated incident, this happens all the time to innocent
people who just want to help out. Peter did not realize the seriousness of co-signing the
loan. He didn't realize by signing his name, he was signing a legal contract that held him
responsible for the entire dept. He didn't take into consideration that if his friend did not repay
the dept, he would ultimately inherit the dept. The bank does not care about how and who
pays dept, they care only that the dept is paid.
When asked to co-sign a loan, don't do it!
This is easier said than done. Usually, when asked to co-sign, it's never a stranger. It's
usually a wife or husband, family member, a friend or someone you have known for a long
time and trust. No matter what your intuition says, your emotions ultimately take over your
rational thinking when making that final decision.
If you absolutely feel obligated to sign that bank note here are some tips and cautions you
can take:
Remember, this is not a reference check or a voucher stating that the borrower can pay. You
are guaranteeing to pay the loan off your self if there is a default on payments. A default on
payment will also mark your credit history and will make it difficult for you to take out a loan in
the future.
About The Author:
Robert Ruiz is an editorial writer who writes for many publications. He is also the founder
and senior editor for Latin Society;silent voices www.latinsociety.com. He also has a monthly
column in The New Tomorrow. Also writes for the web magazine Did You Really
Believe www.didyoureallybelieve.com.
Written September 2004
By Robert Ruiz
Have you ever wanted to purchase a house and was turned down by the banks because your
fico score was below 60? Did a bank ever offer you a loan, however, only under the
circumstances that you provide a co-signer. Then when you search for a co-signer, even your
own family members give you the run around. Maintaining good credit may be easy for some,
however, for others it can become a nightmare, a nightmare that Peter Ramirez cannot forget.
Peter had a friend, he knew from kindergarten which was also his next door neighbor. One
day Peter was approached by his long time friend, where he took the opportunity to tell Peter
about a dilemma he was having. Peter's friend was trying to purchase another house,
however the banks were denying him a loan unless he had a co-signer. Peter was
bewildered for a moment. However, being the good friend that he is, he agreed to co-sign.
Peter never stopped to think, why his friend was not able to get a mortgage loan on his
existing mortgage. He never bothered to ask why his friends and family members were not
able to co-sign. He never bothered to even check on his friend’s credit status. Peter based
his decision to co-sign, solely on emotions and the credibility of his friend’s sincerity.
To make a long story short, a year later Peter's friend defaulted on his loan payments. Not
once, not twice but on numerous occasions. Peter was now receiving letters and phone calls
from the banks collections department threatening to auction his assets to satisfy the loan.
Peter was now held liable for a loan on property that is not in his possession. Peter is also
being sued for the amount of the loan plus the interest, which can possibly lead to the sale of
his own house and assets.
What is happening to Peter is not an isolated incident, this happens all the time to innocent
people who just want to help out. Peter did not realize the seriousness of co-signing the
loan. He didn't realize by signing his name, he was signing a legal contract that held him
responsible for the entire dept. He didn't take into consideration that if his friend did not repay
the dept, he would ultimately inherit the dept. The bank does not care about how and who
pays dept, they care only that the dept is paid.
When asked to co-sign a loan, don't do it!
This is easier said than done. Usually, when asked to co-sign, it's never a stranger. It's
usually a wife or husband, family member, a friend or someone you have known for a long
time and trust. No matter what your intuition says, your emotions ultimately take over your
rational thinking when making that final decision.
If you absolutely feel obligated to sign that bank note here are some tips and cautions you
can take:
- Don't Sign!
- Find out why the person was turned down for the loan
- Find out if the person has a habit of defaulting on other payments. It's cheaper to pay
for a credit report, than having to pay off a loan that’s not yours.
- Consider if you can take on the payments if the borrower defaults. Anticipate the
worst, people lose their jobs, can become ill and even unexpected death can occur.
- If you decide to sign, ask the lender to notify you if the borrower misses a payment.
This would give you ample time to control the situation before it blows in your face.
- Ask the lender if a cap can be added to the loan so your responsibility is only to the
loan itself. This illuminates late charges and other collection fees.
Remember, this is not a reference check or a voucher stating that the borrower can pay. You
are guaranteeing to pay the loan off your self if there is a default on payments. A default on
payment will also mark your credit history and will make it difficult for you to take out a loan in
the future.
About The Author:
Robert Ruiz is an editorial writer who writes for many publications. He is also the founder
and senior editor for Latin Society;silent voices www.latinsociety.com. He also has a monthly
column in The New Tomorrow. Also writes for the web magazine Did You Really
Believe www.didyoureallybelieve.com.
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