Co-Signing

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Co-Signing

Assuming responsibility for someone else's payment obligation in the event that that party defaults.

The Case for Co-Signing: When my son graduated from college, he had no credit, but needed a loan to buy a car. I co-signed his car loan. By doing this, I put my credit on the line to help him. It made sense, because I knew my son was a good risk but the lender didn't. My son established his credit-worthiness with this loan, and I never had to co-sign for him again.

Hazards of Co-Signing: The major hazard in co-signing a loan or a lease is that you may be forced to pay. You only do it for someone in whom you have a lot of confidence.

Too often, people co-sign without giving it much thought—until they find themselves being dunned for payment. Then they begin to look for ways to escape.

But there is no escape. Once you co-sign a note, there are only two ways to get off. Either the loan must be repaid in full, by the borrower or you, or the lender must agree to take you off. The lender is not going to let a co-signer off the hook when the borrower stops paying. The risk of non-payment is why the lender required a co-signer in the first place!

A lender might allow a co-signer off a note if the borrower has been making the payments faithfully for some time. But the lender
has no financial incentive to do this, and there is no way of knowing in advance how long it will take, or if it will happen at all.

A second possible hazard is that a co-signer may be handicapped in getting a loan of his own because of the contingent obligation represented by the co-signing. This is a loan qualification problem. Lenders impose limits on the amount of existing debt a borrower can carry, and the co-signing obligation is considered debt for qualification purposes.

This problem can usually be remedied if you can document that the borrower for whom you have co-signed has been making the payments on time for a reasonable period. The lender who wants to make a loan will have a reason to remove the debt from your loan application. You remain a co-signer, but the lender is ignoring your obligation to the other lender in assessing your ability to repay a new loan.

References in periodicals archive ?
During the past two years, Co-Signer has been testing its approval screening processes and online platform in selected US cities and is now introducing its services via multiple channels.
Youngsters need an adult co-signer to act as a "custodian." So, for the next few years, you won't be able to march into a brokerage firm by your lonesome, plunk down a wad of cash, and walk out the owner of some hot shares.
Title III of the new legislation aims to protect young consumers by requiring students under 21 to have a co-signer, show ability to pay monthly bills or prove that they have completed a financial literacy course.
The Wharton School of the University of Pennsylvania, US, has launched a custom loan programme that will provide assistance to international MBA students who do not have a US co-signer.
And should qualifying conditions, such as requiring a co-signer, be a turnoff?.
Sadly, no news yet if the co-signer on the mortgage is a Mr V.
Thus, the band is really the "co-signer" of the loan.
The court disagreed, saying Holmes could have protested or overridden its decision in his capacity as chairman and a co-signer of the checks.
In developing policies for their group, the plan is to act as a co-signer to help locals buy equipment to work for the band, as well as invest any profits garnered from these operations into subsidizing jobs for different agreements.
At Bolton's confirmation hearing, Jesse Helms told him, "John, I want you to take that ABM treaty and dump it in the same place we dumped our ABM treaty co-signer, the Soviet Union, and that is to say, on the ash heap of history." Mission accomplished.
(Students can enroll without a co-signer if they are over 18 years old.) Despite the fact that they have little income or credit history, such solicitation is not surprising.