One common problem that I see on a weekly basis in my office is clients who have co-signed for a debt, usually a vehicle. A cosigner is a person who can legally sign loan papers or documentation with another person who is having difficulty obtaining a loan, or sometimes getting a lease for an apartment or rental unit. As a cosigner, the person makes a legal agreement to be jointly responsible for repayment of the loan should the first signer fail to pay debts in a timely fashion. This is extremely important to understand for anyone who would cosign on documents. They risk their credit and their own financial status if the person who asked them to cosign does not meet his/her financial obligations. Moreover, sometimes when you cosign for a loan, it may impact your ability to obtain loans for yourself, since remaining unpaid debt may be considered “bad credit."
If you are asked to be a cosigner on a loan, then you should ask some questions. You should ascertain a person’s ability to repay the debt they plan to contract, unless you intend to pay it for them from the onset.
Late payments can adversely affect your credit if you are a cosigner, and if a person does not inform you that they’ve fallen behind, you may be unaware that your is taking a hit.
It is very important to understand that if you are co-signing it is just as if you are buying the car or whatever else you are co-signing for. BOTTOM LINE BE PREPARED TO PAY IF THE PERSON YOU CO-SIGN FOR DOES NOT OR YOU WILL HURT YOUR CREDIT.