Sign a personal loan
Being a joint signer on a personal loan for a friend or family member is a very generous offer because it will likely mean the difference between them is able to qualify for such a loan and not meet the requirements. However, the decision to become a joint signer for a personal loan should not be made lighter. It is the responsibility of potential signatories to educate themselves about how this situation affects them, especially those relating to their responsibilities to the loan if the borrower fails to pay.
Most joint signatories are unaware that this loan will appear on their credit report. Remember that this can affect your ability to get your own loan when a personal loan that you use together to calculate the debt to income ratio. This can also affect the interest rate you get from your own loan. If you feel that you should sign with a personal loan for a friend or family member, do it with the understanding that after making timely payments, the borrower will try to repay the loan in their own name. . The more money you sign, the longer you can become part of the loan.
Because loans can have a positive and negative impact on the co-signer's credit rating, it is important to arrange loans so that those who sign the co-signer can access account information. This will allow you to know what has been paid for the loan and what is still owed. Make sure the lender will tell you about late payments or non-payment issues with the borrower as soon as that happens. Too often the signatories do not realize there is a problem with the loan until the credit has an impact on them.
While signing a loan for a friend or family member can help them, be aware of how it will affect not only your credit but also your relationship. Nothing can damage relationships faster than money. It is important for the joint signer to look at the conditions that lead to individuals who need them. If that happens because of a simple money management error, then you don't do it or help yourself. However, that is the result of circumstances that they have no control over you might want to consider.
To minimize your risk as a joint signatory, don't get used to offering it to friends and family. The word will spread like wildfire with more requests towards you. If you don't feel your own credit and finances can't survive if the borrower doesn't repay the loan, then don't sign a personal loan. It may be difficult to say no, but it's important you can do it.
You might consider asking the borrower to give you verification that payments are being made including periodic reports or canceled checks. To reduce your risk further as signatories urge borrowers to buy personal loan insurance that can cover loan payments for a certain period of time due to unemployment, illness or death.
Signing a personal loan with someone is more than just giving your signature. You put your financial history and worthiness for that person. It is important that you carefully review the borrower's needs for money and their spending patterns. If they owe money to others or continue to live beyond their means, go with clear awareness. There are times when signing together on a personal loan is the right thing to do. Only you can make that decision. If you decide to go ahead, make sure you are able to pay the missed payment fees and the lender will give you information about the status of personal loan payments.