When a parent or a dear family member lends you a helpful hand by co-signing a loan such as a car loan or an application for a credit card, they are essentially agreeing to pay back the debt by themselves. In reality, they are the ones who end up paying back.
According to a survey published by creditcards.com, 38 percent of the co-signers had to pay a potential sum of the bill because the main borrower did not have enough funds to pay. The survey indicates that one in six adults has co-signed a loan or credit application for someone else. Almost half of co-signed are done on behalf of a child or a stepchild.
This can be a good way in helping someone get up on their feet. However, co-signers must realize the potential risks that prevail. When you have co-signed a loan, you are contractually obligated to pay the loan back if the borrower has not.
If you see, you’re signing a loan since the lender believes the borrower is unable to qualify for a particular reason. Since you’re vouching for a loan, you’re at a high stake.
The survey further found that almost half of the co-signs accounted for auto loans and nearly 19 percent for student loans. A lot of students are currently borrowing a lot of money in hopes of paying it back in the near future when their investment of studies has paid off. However, they don’t clearly realize what they’re getting involved into. Elders such as the parents or other care takes who are co-signing believe that they are playing their part but little do they know what they’re committing themselves into.
The way to go about this is when an individual request you to co-sign a loan, you might want to check their track record regarding paying back their debt on time. It could be that the person has good intentions of paying it back but is currently seeking a co-signer because of possible troubles in the past.
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