Dangers When Co-Signing a Financial Loan

March 13th, 2020 by admin Leave a reply »

Before you sign your name to any loan document, make sure that your eyes are wide open to the dangers involved. It is not uncommon for a family member or close friend to ask for financial assistance or to ask that you just “sign the paperwork” so that they can get a loan. But when they don’t make payments on their debt, you are responsible to make the payments for them.

What you really need to be aware of is: should the borrower skip town, default around the financial loan, or just choose to cease having to pay, you will have to come up with the money that is owed. If this is a house loan, you could possibly be economically sunk because you have committed to pay the mortgage.

When you co-sign on a home mortgage, and the borrower stops making payments be aware you will have to pay every penny of the dollar amount owed to the financial institution.The bank or lender will not let you off the hook as you had agreed to make these payments when you co-signed the loan.

Don’t think that the lender will let you off. They won’t. When you co-signed, you made the commitment to pay the complete loan amount. If your friend or family member has lost his job or is going through a tough financial situation, do not expect the lender to listen to the sad tale. They do not care what happened, they just want their money. All of it.

Just because your name is not on the deed (or title) of the property, this does not mean that you do not have to live up to the financial obligation. You do. Having your name on title and owing money to the bank are two different things. You are obligated to make the payments if you co-signed for the loan..

When your friend or family member is in a situation to meet the financial requirements (credit score, etc), then you can request that your name be taken off the loan payment as a guarantor. You must receive, in writing, confirmation from the bank or lending institution that this has been done. Just because you made the request does not take you off of your legal obligation of ensuring that the debt is repaid.

Don’t forget though, that if you sign as a guarantor on someone else’s mortgage or loan, this will impact your ability to get a mortgage or a loan. The reason being, is that the lending institution looks at all the debt that you have committed to paying and as such, the co-signing of someone else’s debt has just become your debt.

If you sign as a guarantor for a car lease or any other lease, it is the same as signing for a home loan or mortgage. You are legally responsible to pay back all of the money if the person doing the borrowing does not make the payments.

It can be a hard situation when someone is down on their luck and needs assistance, but you must take care of your financial health before trying to help out others.

Co-signing for someone else’s debt is a huge obligation and should not be taken lightly.

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