Co-signing – You Become the Borrower
You Become the Borrower
When you cosign a loan, know that you are now being asked to guarantee the full amount of the debt. The lender has refused to make the loan to the person for whom you are cosigning. The lender’s decision has been based on facts that reveal the risk is too great to loan the money to your friend or relative.
Be sure you have plenty of money to pay the loan should your friend default. If the borrower misses a payment, the creditor is going to be looking your way within days. You will have to come up with the funds. You are just as much a borrower as the other party. Do you really want to accept this full responsibility? Be sure you can afford to pay any and all debt payments, and even the full balance of the loan if need be.
When you sign the note, the money is really being loaned to you. The reason you have been asked to sign is that your collateral, your character, your credit and your capacity are sufficient for the loan officer to feel good about the security on the loan. Your signature is the loaner’s security.
Your thoughts on this subject? Your comments appreciated!
Content © Rich Brott, 2011
