You have worked so hard on building a good financial reputation. You have saved some money, you have been responsible with managing your debts, you have maintained a good to excellent credit score, and you feel like overall, your financial future looks bright. Your family member or a friend asks you that since you have a good financial standing, if you could cosign for a loan that they wish to take out? So what do you do?
According to Investopedia.com, “a cosigner serves as an additional repayment source for the primary borrower. A cosigner can help a borrower to obtain loan terms that they may have otherwise been unable to be approved for.” Lending institutions, may sometimes require a borrower to obtain a cosigner, to boost the confidence of the lender, that should the borrower default, and not able to pay back the loan plus interest, that someone else, is able to make the payments.
With that said, this is a serious decision, and one that should not be taken lightly. Before you decide to act as a cosigner, you should consider your own personal financial goals. Would you be able to still meet your financial goals, if your family member or friend defaults on the loan, and it now becomes your responsibility? How would your relationship with your family or friend be impacted if you have to pay for their loans? Just remember, that you should not jeopardize or risk meeting your financial goals, to help someone else with theirs.
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