Thursday, September 11, 2008

Think Twice Before Co-signing a Loan

With home loans getting more difficult to obtain in many cases, you may be asked by a family member or friend to co-sign a loan. But, before you co-sign, keep these points in mind.
Your liability for the loan may keep you from getting other credit (or loans) because creditors will consider the co-signed loan as one of your financial obligations.

Make sure you can afford to re-pay the loan or make the payments. If you become responsible for the loan and can't make the payments, you will likely be sued and your credit will be damaged.

Before you pledge property (real estate, RV, boat, auto) to secure the loan, make sure you understand the consequences. If the borrower defaults, you could lose the pledged property.
Try negotiating the specific terms of your obligation. For example, you may want to limit your liability to only the principal, and not include late fees or administration costs. Get it in writing.
Get the lender to agree to notify you immediately if the borrower misses any payments. This will give you time to deal with the situation before it becomes a major problem. Once again, get it in writing.

Check your state law for additional co-signer rights and responsibilities.
Get copies of all documents!

Christopher Reshetar


Home Mortgage Consultant and Regional Manager
Homeservices Lending, LLC Series A dba Homeservices Lending
An Affiliate of Wells Fargo Home Mortgage
Toringdon Way, STE 200 Charlotte, NC 28277