When Should You Co Sign A Personal Loan?

Co signing a personal loan is a very risky business, you are in effect taking the loan out yourself because the institution that is offering is does not trust the person who is applying for the loan or their collateral. Given banks attitudes to loaning money to people these days that doesn't say anything about the person who is applying for the personal loan just something about banks lending practices. But the first step in deciding whether or not you will co sign a loan is can you afford to pay it off by yourself? Because that is what you are agreeing to do if push comes to shove.

If the person who is applying for the personal loan makes all their payments on time every time then co signing the loan will have no effect on you whatsoever, however life is not always that easy, even the most honest and trustworthy amongst us has troubles at times which can cause problems. Sickness, loosing a job, personal emergencies, there are many legitimate reasons why someone might find themselves in a position where the repayments can be a problem. As the co signer of a loan this is where you are required to step in or risk your own credit history or even bankruptcy.

One of the things that you have to be very aware of as a co signer of the loan is the fact that your credit history can be damaged without the person taking the loan even realizing. If they miss a few payments or are late in paying, as a co signatory you are liable for their oversights. If whomever is asking you to sign for this loan is completely punctual in their payments and honest with you if they are not, as well as being aware of the consequences then there need be no trouble, otherwise you could be lumbered with their mistakes or oversights without them even realizing. Their ignorance or wishful thinking can have dire repercussions on your own credit history so make sure if you do decide to co sign a loan that they are aware of the implications and keep you informed, whether verbally or with documents of their payments so that you do not get a surprise next time you want to buy a mobile phone or take out some other form of credit yourself.

Everyone wants a co signatory on a loan, it makes the process of getting finance so much easier, but for your own sake you have to be very careful to whom you extend this, if you don't know the persons financial history and how they deal with money then you are leaving your self wide open, not just to the obvious having to pay the loan off your self but also to the more subtle getting a bad name amongst lenders for the mistakes of someone who you honestly backed.