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Personal Finance
Don’t Cosign A Loan, Don’t Bet On A Losing Horse
Can’t decide whether to help out someone in need? Let me.
The reason people need a cosign is because they can’t do it alone without your help; they need you. The question is, are you willing to take a chance on the Detroit Lions, whose record is 2 wins-12 losses-1 tie. I wouldn’t.
Yes, we take risks when we make investments, but consigning a loan is not the same thing – it’s entirely different. You’re investing in someone who has already shown you a record of failing financials.
Choosing not to help your best friend or sibling get a new car, take out a personal loan, or get a credit card is disheartening – especially if you have the means to help.
What happens if they start missing payments? What happens if they decide they can’t make any payments and you’re stuck with the payments? Will you be okay with that?
The Parent Plus Loan
Though the federal parent plus loan isn’t classified as a cosign perse, I find it a good example for this article.
My mother took out a parent plus loan for me in her name alone, but it never backfired for her.
I have never missed payments on the loan; I even paid years ahead of schedule. Despite the loan being in my mother’s name, I took it on as my responsibility to pay back the loan since it was my education she offered to help pay. And for that, I will always be grateful.
I’m not sure how many parents have their kids pay back the parent plus loan since the loan is in the parent’s name, but I do believe it’s a decent path to follow. If you’re going to go into unnecessary debt for higher education, pay it off yourself; don’t get other people mixed up with your student debt.
Gist
My mother got lucky. She took out a loan on my behalf, and it worked out for her. The balance is always paid. Payments are never missed. The loan is always paid ahead of schedule.
Realistically, when you’re involved with a real cosign loan, the risk is much higher, and it has both people’s names on it. I’ve seen how missing a payment can f*ck up people’s credit, and I didn’t want that for my mother since I committed to making all of the payments.
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Don’t Write People Off.
Not all people who require a cosigner will have issues making faithful payments-many work to build their credit and have turned a new leaf.
Still, why mix friendship and familial relationships with money in the first place? Often, we need to give people the space to figure it out for themselves.
We can also help people financially without signing a piece of paper that locks us in.
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This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.