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 ?
If these warnings are too late, and a grandparent has already co-signed a loan, here are ways to contain potential damage:
Well, I've never co-signed for anyone, so my advice isn't clouded by any bad experience.
"Andreoli would not have co-signed the note without reliance on Mr.
Before you co-sign for anyone, insist that they calculate their debt-to-income ratio (see formula below), since it's a good indicator of whether they have debt problems.
Some members of the public who attended the meeting expressed concerns that the statement would be worthless unless co-signed by trust bosses.
Paris, Mar 21, 2019, SPA -- In the presence of Minister of Culture of the Kingdom of Saudi Arabia (KSA) Prince Badr bin Abdullah bin Farhan and the Director General of UNESCO Audrey Azoulay, the Saudi Ministry of Education and the United Nations Educational, Scientific and Cultural Organization (UNESCO) co-signed a memorandum of understanding (MoU), aiming at enhancing cooperation in the field of culture and reparation of heritage.
The Kuwaiti and Turkmen governments also forged an agreement for closer ties on the cultural front, where Kuwaiti minister of state for national assembly affairs and acting information minister Adel Al-Kharifi co-signed the deal with Turkmenistan's deputy prime minister.
And, finally, a memorandum of understanding was co-signed on the political consultations between the Saudi Ministry of Foreign Affairs and the Ministry of Foreign Affairs of Cyprus, co-signed by the Minister of State for Foreign Affairs Dr.
It was co-signed by Saudi Minister of Finance Mohammed Al-Jadaan and Cyprus' Foreign Minister Ioannis Kasoulides.
In fact, if you and your ex have joint or co-signed debts, bankruptcy will have an effect on both of your finances.
The European Commissioner for International Cooperation and Development, Neven Mimica, co-signed new regional funding for cooperation with representatives of regional organisations from West Africa, covering the time until 2020.
In addition, GUPC will invest $400 million with the involvement of insurance group Zurich, which co-signed the agreement.