When it comes to getting personal loans, lenders will generally check the credit and income of the individuals that are looking to borrow the money. If the numbers do not look good, chances are the lender will not agree to lend the money unless they have a cosigner. That cosigner will also be evaluated by the lender, and if the lender does finally agree to lend, the cosigner will also be legally responsible for the loan.
For the primary borrower, this is good news. Unfortunately, for the cosigner, this can be quite troublesome. If you are asked to be a cosigner, here are a few reasons you may want to think twice.
1. You may end up having to pay it off
There is a reason the lender has advised the borrower to find a qualified co-signer to get the loan: there is something in the borrower’s history that the lender finds worrisome. This could be the fact that the borrower is young and has yet to build a credit history or they have proven themselves a risky client because of past inability to pay off loans. Regardless, there is always the risk that the borrower might not be able to pay off the debt they have taken on. If this happens, it is up to you to pay off the amount borrowed, meaning it is up to you to pay the loan off.
2. Your credit score might take a blow
When you cosign for a loan, do not make the mistake of thinking that your credit history will not show the borrower's activities. If they make late payments, it will show up on your records. This can hurt your credit score severely and will affect your ability to access good deals, possibly even your chances to borrow money for quite a while. This may force you to end up having to rebuild your credit, something which you will want to avoid doing simply because it takes a lot of time and effort.
3. You and the borrower may have a bad relationship
What happens if the borrower fails to pay off the loan and ends up putting the burden on your shoulders? Apart from what we have said so far previously, there is another aspect to it that you might not have thought about. Being forced to bear a burden that you may have signed for but did not expect to carry will more than likely leave you unhappy and even angry at the lender. After all, they asked for your help so that they can be qualified to borrow, but now it is up to you to save the both of you. In other words, your relationship with the borrower may get hurt, leading to various other consequences.
Although none of the above may actually happen if you do decide to cosign with a borrower to help them access a loan, there is always a risk for them to happen. Unless you have an incredibly good reason to cosign the person, such as you fully trust the person knowing their history with you, then you should think twice before agreeing to cosign for the loan. It may seem selfish, but it is selfish on the borrower's part if they do not pay the loan off! Be smart about the whole situation, and take the time to decide whether or not you should cosign.
Stones River Credit is an installment loan company in Murfreesboro, offering a variety of fair, honest, and straightforward loans to fit any client's needs. If you are looking for personal loans or anything else, contact us today!