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Should I Co-Sign a Loan?

What do I need to know before co-signing a loan?

Q: What do I need to know before co-signing a loan?

A. Co-signing is an incredibly kind gesture. In most cases, borrowers looking for co-signers can’t close loans otherwise because of insufficient income or inadequate credit.

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But co-signing is risky. Co-signers accept full responsibility for the debt. If the borrower defaults, even due to disability or loss of employment, the lender will turn to the co-signer to pick up the payments. Failure to do so carries all of the consequences you’d experience as the primary borrower, including late payment penalties, potential legal action and even damage to your credit rating that affects your ability to borrow.

The ultimate considerations to weigh before co-signing is whether you trust the borrower to make good on the payments and whether you’re ready to take on the debt if he or she does not.

– Shaun McGee, vice president of financial services, AAA Northeast

To learn more about AAA financial services, visit AAA.com/Financial.

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