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Before you cosign on the dotted line ... protect credit
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Kranitz says it took one year for workers' compensation to kick in and for the young man to receive some money because the company kept appealing. The truck was repossessed. Kranitz says he later received a letter from the bank letting him know that he had to make a couple of months' worth of payments, plus accompanying fees.

"I had a choice: Come up with more than $2,000 to get the truck back or have the bank sell it and still owe the balance on the truck." 

Krantiz chose to get the truck back, and says he sympathizes with the young man's situation, but could use the "$4,000 or so" he "lent."

3. Know how to operate like a lending institution.

How to operate like a lending institution:
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Once you co-sign, you can't simply walk away from the loan. That's why the most critical time is the moment before you put the pen to the paper. This is the point where you may be able to negotiate specific terms of your obligation with the lender.

The Federal Trade Commission provides this example, "You may want to limit your liability to the principal on the loan and not include late charges, court costs or attorneys' fees. In this case, ask the lender to include a statement in the contract similar to: 'the co-signer will be responsible only for the principal balance on this loan at the time of default.'"

How to say 'no'
You may choose not to sign, but rather than leave the person stung by your response, provide some alternatives. Credit counselors suggest telling the borrower that he or she can develop his or her credit by staying with one bank, getting a secured credit card, taking out a small loan or getting a gas card. Make sure to stress that he or she should keep the limits low and make timely payments.

Bankrate.com's corrections policy -- Posted: Oct. 2, 2006
 
 
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