The Perils of Cosigning

Bank Loan Cosigning Perils

There may come a time when a friend or relative applies for a loan and the lending institution refuses unless the applicant can find a cosigner. If someone you know asks you to cosign a loan, consider the request very carefully before you agree.

Chances are that the lender would not have required a cosigner if the applicant’s credit rating was good. If you do cosign, you are not simply doing your friend a favor; you are agreeing to pay off the loan in full in the event that your friend cannot.

In fact, if you are accepted as a cosigner, the lender may be more persistent in dunning you for repayment than in pursuing the borrower, on the assumption that your financial resources are greater. As a cosigner, you have few rights but possibly crushing obligations — and all this without having received a penny from anyone.