Jerry Taylor explains why cosigning a loan is risky: even if the borrower pays on time, your credit score and borrowing capacity can suffer. If you do cosign, get the same access to documents and payment info as the primary borrower, and evaluate whether they can actually repay it.
In case you didn't already know, it is rarely a good idea to cosign a loan or a lease. Here's why. Cosigning a loan is serious business. Even when the borrower does everything they're supposed to do, it can still have adverse effects on you. It can hurt your credit score and affect your ability to borrow money, even if the loan is paid on time. Before you sign, make sure you have read the loan documents and make sure you get the same documents that the person gets who is actually taking out the loan. Next, make sure that you get access to online information to if the borrower has paid the loan, or arrange with the borrower to make sure that you are notified each and every month that the loan is paid. The best idea is just say no when somebody asks you to cosign a loan. But if you're thinking about doing it, you need to assess the risk just like a bank would. Does this person have the ability to repay this loan? If you don't feel confident in that, don't do it. Click on my picture in my Linktree to get my newsletter, and you can work with me there.
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