At some point in your lifetime, you will likely have a relative or close friend ask you to “do them a big favor” and cosign a loan for them. That will seem like a pretty innocent request. However, you may be signing up for more than you initially thought. Before you agree to become a loan cosigner, there are many things you will need to consider. Knowing the basic rules and regulations of what cosigning a loan makes you responsible for is a great start. When you cosign a loan, keep in mind that the following rules and laws apply simply by you putting your signature

on the paperwork for them:

It is also worth noting that these loans from specific lenders often default, meaning that the loan cosigner is asked to repay the loan. By becoming a cosigner to a loan, you are taking a risk that a professional lender is unwilling to take. If the person you are signing for meets the borrower’s requirements, you would not have to cosign their loan in the first place.

In most states, if the original signer misses a payment, that payment can immediately be collected from the loan cosigner (you). Studies have shown that at least three of every four cosigners have had to send a payment during a cosigned loan. On top of the monthly payment already due, you may be subject to additional fees, such as late fees. You also may experience wage garnishing or lawsuits if you are unwilling to pay the loan upon it becoming overdue.

Remember these as some tips if you do cosign a loan for someone:

For more information on cosigning loans, please feel free to contact us.

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