Now for something appropriately spooky: the Wall Street Journal has created a list of five things you should know before you cosign for a student loan. In reality, there's only one thing you should know before cosigning for any kind of debt - DON'T DO IT!!
I think the biggest myth out there regarding cosigning is that you're simply being a reference for the person who is going to benefit from the loan. Nothing could be further from the truth. When your idiot brother-in-law asks you to cosign for that speedboat he's been dreaming about, he is really asking you to assume his debt. In the meantime, when he loses his job due to "back pain" or whatever lame excuse he comes up with, you are going to be stuck footing the bill. And you're not even a boat person, are you?
And if your nephew can't afford tuition at the overpriced private school from which he's chosen to earn a useless degree in anthropology or underwater basket weaving, don't cosign for a private student loan! If he needs private loans, it means he's exhausted his federal grant/loan limit, which means he is being price gouged with respect to tuition.
Anyone out there have any cosigning horror stories? I'd love to hear them.
Happy Halloween!
No horror stories for me, thank God. My nephew called me once to ask me to co-sign for a car. I did not do it for many reasons, not the least of which is that this nephew does not possess the best character traits in the world (which is why I no longer speak to him). The principle reason though was because I refuse to take on anyone else's debt obligations in any way. I have my own debt to deal with so inviting more of it from others is not in my play book.
ReplyDeleteThe same thing happened to me, only it was one of my sisters. She said she and her husband just had "a little bad credit" (I'm not sure what that meant) but he really needed a new truck since he totaled his (and didn't have insurance!). These were the same people who were constantly on the brink of foreclosure but were always taking expensive vacations. I told her no, thank God. At that point in my life, I was more susceptible to guilt trips, but for some reason the whole thing set off alarm bells for me, and I'm glad!
DeleteRead the fine print on the document you co-sign...usually the creditor has the option to come after the co-signer FIRST if they want to.
ReplyDeleteNever, ever, EVER cosign on a student loan which is non-dischargeable!
You'd be better off taking a cash advance from a credit card and giving it to the person than signing a student loan...at least the credit card debt would be dischargeable in bankruptcy.
I completely agree. If you insist on taking out debt to "help someone," at least make sure it's the dischargeable kind! And I also agree that creditors often can, and prefer, to go after the cosigner first. That's because the reason the bank demanded a cosigner to begin with is because it knew it couldn't rely on the applicant to repay.
Deletethe only reason i still live in this country is because my mom co-signed for my law school loans. otherwise, i would have left a long time ago.
ReplyDeleteOh man, that sounds bad. Are you able to keep up with the payments so your mom's credit isn't damaged?
ReplyDeleteWhen I was in the military, I knew a Sgt who co-signed a loan for an airman to purchase a house trailer. Big mistake.
ReplyDeleteOh dear lord, that sounds tragic. Co-signing on a depreciating asset - a double whammy!
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