Know what it truly means to be a co-signer before agreeing to help a friend or member of your family.
If a friend or family member has fallen on hard financial times in Tennessee and seeks a loan, you might be asked to be a co-signer because of your positive credit history. While it is great to be willing to help out a loved one, you have to know exactly what you are getting into. Should your friend or family member fail to keep up with payments or consider bankruptcy, you are sure to be impacted in some way. Know the role you play and the consequences it can have.
You will have a new debt on your credit report
The first thing you should know is you will have a new debt appear on your credit report should you choose to become a co-signer. If your family member or friend keeps up with payments and acts as a responsible borrower, the loan will help her or his credit score just as much as it helps yours. Of course, your credit scores could take a dive if your loved one does not prove to be responsible.
Cosigning could cost you a relationship
Financial matters between family members and friends always have the potential to cause the relationship to deteriorate if the money is not paid back or if the co-signer’s credit profile is marred because of missed payments. Even if the person does not default on a loan, co-signers might find themselves with a slight sense of dread at the idea of what might happen to their credit standing if something were to go wrong with the loan.
You might become responsible for missed payments
Not only can a defaulted loan on which you cosigned harm your credit, you will become responsible for making the remaining payments. This can compromise your financial situation, your budget and your way of life in general. Depending on how large the loan is, you might spend several years paying it back.
Work with your family member or friend to successfully pay back the loan
Rather than leave anything to chance, work with your loved one to pay the loan back. For instance, recommend your family member or friend set up an account specifically for the loan and add the payments to her or his budget to better ensure payments are made on time. You should also ask that you be notified if any payments are late so you can step in if necessary to avoid a financial disaster.
If a defaulted loan in Tennessee results in bankruptcy for the lender, co-signers have just as many rights as the original borrower. Get in touch with an attorney for more information and to understand those rights.