Proverbs 17:18

“A man lacking in judgment strikes hands in pledge and puts up security for his neighbor.”

 

This scripture clearly warns us of the danger involved in providing collateral, security or surety for another person.  One very quick way of going into debt is by cosigning someone else’s loan.  People who cosign think they are doing a relative or friend a favor.  The potential cost of their signature is usually not explained very carefully to them.

 

When you cosign a note you are taking on someone else’s debt.  Rarely do you know just how much and what kind of debt that person may have.  Debt is an excess of liabilities over assets.  Of course, this means that if you are a cosigner of debt, your assets may be called upon to pay off the debt of another person without assets.

 

A home, if financed conservatively, may usually be sold for more than is owed by the mortgager.  A car, or furniture, or most any depreciating item purchased on time cannot usually be sold for sufficient money to pay off the lender.  This is often the kind of debt for which cosigners are asked to be involved. 

 

A better name for cosigning may just be “borrowing a signature” or lending a signature.  The concept is really that of “co-borrowing” instead of just cosigning.  Cosigning conveys the idea that the action is simply a five-minute exercise of goodwill.  Co-borrowing conveys a longer-term relationship!  When you view the action with “co-borrowing” in mind, your signature could actually mean everything you own – your home, bank account, stocks, bonds, possessions, your good name and good credit history.

 

 

Your thoughts on this subject?  Your comments appreciated!

Content © Rich Brott, 2011

 email to a friend