Co-Signing for a Car or Home Loan
Whether you’re asking someone to cosign with you or considering becoming a cosigner on someone else’s loan, it’s important that you know what you’re getting into. Co-signing for a car is a big decision that should only be made after all of the implications have been discussed with the applicant as well as the financial institution providing the loan. When you cosign for a car loan for a friend or family member, you become liable for any payments that they can’t make. If they default on the loan, you’re legally responsible to pay off the remaining debt. This puts your credit score at risk and could make it difficult for you to get a loan of your own in the future. Be sure that you know you can rely on the person you’re co-signing for before you put your name on any official documents. Once you sign, you can’t back out. You’re committed to whatever length of time it takes the applicant to pay off the loan. Another serious legal implication of cosigning for a car is the possibility of being sued should payments be missed. Becoming a cosigner means that your financial standing speaks for the viability of the applicant, and if they fail to pay up, you’ll be the one that the lending institution seeks out to cover the missed payments. This could turn into an ugly cycle of lawsuits should you decide to counter-sue for part of the payment and the outcome can have serious implications for your credit rating. If you’re sure the person that you’re signing for is reliable, go ahead and cosign for a car loan to help them get the money they need for that new vehicle. For those who need money right away and can’t find a willing co-signer, there are other options available. One is to sell any structured settlements you’re currently receiving payments from. Cashing these out now gives you a lump sum up front, but it’s important to consult with a lawyer first to ensure that you understand the pros and cons as well as any tax implications.