As the Christmas and Thanksgiving Day near, we feel our heart crying to live some happy moments with our near and dear ones. We become very keen to spend some chilly nights with our brothers, sisters, uncles, aunts, nephews, nieces before the warmth of the fireplace.
The relationship that blood denotes is the strongest among all. Most of us can do anything for our family at any time. So what would be your answer if someone in your family pulls you aside during this winter holidays and politely asks you to stand as a co-signer? It is undoubtedly an awkward position. On one hand you are hesitant as of the unwanted negative impact on your finances and moreover, on your personal life if the member fails to repay the loan. On the other hand, you fear of blemishing a good relationship.
However, if you have decided to help just by placing a signature on the loan petition, you need to be aware of the credit implications that you might have to face:
- If you are co-signing a loan, the creditor will simply take you as a beneficiary and not someone who is guaranteeing the loan.
- The lending farm is going to fetch your credit report too. Each time your credit report is inquired, you score gets a hit, though too little.
- Co-signing a loan is going to affect your credit score if your relative fails to pay back the loan or pays late.
- Being the co-signer, you are equally responsible to repay the amount. Therefore, if your relative fails to pay it back, you are needed to do that.
Co-signing is a serious issue that you need to consider twice before appearing on any conclusion. Simply, it is taking a loan on your own.If you still choose to cosign a loan petition, below is what you need to do:
- Make sure all the invoices are sent straight to you, your relative pays you, and you in turn, forward the money to the lender. This way, you’ll remain aware of the payment due dates and if any payment is due.
- Keep authentic records of all payments you receive from your relative and deliver to the lender. This is a safer technique as in case your relative dispute with anything, you’ll have a better weapon to defend yourself.
There is nothing off beam in co-signing a loan but you need to make sure you are aware of the risks associated with and know appropriate defense in case you fall in any awkward situation whenever you sign for a loan.
