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My friend Alexandra has asked me to co-sign a loan. I don’t know much about it. But, I have heard that co-signing can lead me to debt. Is it true? Do I have to make the payments if I co-sign on a loan?

You should ask your friend how much loan she needs. If you are trying to help your friend and the loan amount is small you can consider giving her a personal loan or ask your known sources to help her out. It will at least keep credit history clean and prevent your friend from resorting to payday loan.

Before you decide to cosign a loan make sure you know the purpose of the loan, type and term of the loan. In short think of yourself as a lender. When cosigning a loan be sure that you can repay the loan and it won't be a cause of financial hardship. The reason I say this is because you will be responsible for paying the loan. When you're cosigning a loan it means that you're promising to pay the loan if the borrower fails to pay. You are taking full responsibility of inheriting the debt if the borrower is unable to pay or act irresponsibly in repaying the loan. Even if the loan is paid on time the new debt will drop your credit scores. You will find it harder to qualify for mortgage or car loans since your debt to income ratio will increase. If you are the cosigner of the loan you will be obligated to make the payment incase of default.

Sub: #1 posted on Sun, 05/15/2016 - 21:50


(Posts: 21 | Credits: )

Thanks Lewishenry. I've understood the pitfalls of co-signing a loan. But, sometimes it's difficult to avoid a request when a close friend asks for the favor. But, as you told, I can offer a personal loan to help her out.

Another thought came into my mind - What if I'm confident that she'll be able to manage the loan properly but a financial emergency restricts her to do so at some point of time?

Sub: #2 posted on Thu, 05/19/2016 - 22:35

Shaina Shaina

(Posts: 2 | Credits: )

Well, helping a friend financially is a noble work. But, when it comes to co-signing a loan for a friend, you must be aware of some crucial facts beforehand. Cosigning for a loan means you're liable to pay the debt if the person stops payments.
You may have to pay the whole amount of debt if your friend stops payment. You're liable to pay the late fees or collection costs as well.
Collection methods will be the same for you, like the original borrower.
If you can afford the amount, then it is advisable that you must check the state law for additional cosigner rights.

Sub: #3 posted on Tue, 05/31/2016 - 05:39

Sanders Patricia Sanders Patricia

(Posts: 1238 | Credits: )

Hello Shaina,
I can completely relate to your situation. It becomes really hard to ignore a close friend. But, just as you said, what you will do if your friend cannot make the payments due to a sudden emergency. In this case, you must think of yourself first. Even if you don’t co-sign the loan, you can at least help your friend with some money only if you’re financially stable.

Sub: #4 posted on Thu, 06/02/2016 - 19:40

Phil Bradford Phil Bradford

(Posts: 166 | Credits: )

Do not do it. Why is she not asking her family to cosign? That could be an indication that she has burned them in the past. If she is late on payments, you take the hit. If she defaults, you again take the hit. It is possible that your friend could file bankruptcy and leave the debt in your lap.

Sub: #5 posted on Sun, 06/05/2016 - 16:46

Moderators Cum Industry Expert
(Posts: 17319 | Credits: )

Forget friend, I wouldn't even co-sign for a relative. The risk is more and the reward is less. Plus, the lender will sue me first if the borrower defaults. And, who would want to face a lawsuit? Not me. Moreover, I may have to pay tax if I agree to settle debts later.

Sub: #6 posted on Thu, 06/23/2016 - 23:11

ditchdebt ditchdebt

(Posts: 679 | Credits: )

You should think of yourself first.
However, Shaina, you can help your friend manage his/her finances well, so that he/she can make the required loan repayments on time. This way, you can him/her as a true friend as your friend will understand how to manage personal finances.

Sub: #7 posted on Fri, 07/01/2016 - 05:10

Good Nelly Good Nelly
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