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Cosigning a Loan? What you should know first.

Posted on: September 30, 2016 by Healthy Lives No Comments

Financial Fitness Friday

 

 

 

 

 

As a cosigner, remember that if the borrower (your friend, family member, significant other) misses payments, your credit score will take a huge hit! If the bank is requiring a cosigner, the bank doesn’t fully trust that the borrower will make the payments. If the borrower misses a payment, the lender can come after you for the money.
Even if the borrower you cosign for makes all his or her payments on time and in full, cosigning a loan can still affect your credit. The total amount of the loan is now considered your debt and factored into your debt-to-earnings ratio (how much you owe compared to how much you earn) when you apply for credit on your own. That means that cosigning a loan can lower your credit score and limit the amount you can borrow.

There are several reasons why people are turned down for credit and seek cosigners:
• No established credit, a big factor for young borrowers
• Past financial problems, like bankruptcy
• Poor credit history
• Not enough income
• Too much current debt

If you want to help a friend or family member, it may be better to point them to a trusted financial advisor.

Healthy Lives

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Healthy Lives is a unique approach to corporate wellness that helps employers improve their employees’ health and productivity and reduce healthcare costs through an unparalleled combination of deep clinical expertise, personal service and comprehensive solutions.

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