debt

5 reasons you should never be a co-signer

You are enabling bad behavior
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You are enabling bad behavior © lightwavemedia/Shutterstock.com

You are enabling bad behavior

If your pal or a family member does come to you with a sob story fit for a song that only your signature on a loan can fix, don't let your emotions and fondness for the person dictate your decision.

Instead, politely decline and say you don't want to spoil the relationship, advises Coleen Pantalone, a personal finance expert and an associate dean of the College of Business Administration at Northeastern University in Boston.

Ultimately, she says, by saying "no" you are doing the other person a favor.

"If someone is having trouble managing their money, you are abetting that bad habit by helping them," says Pantalone.

If, for whatever reason, you ultimately agree to be a co-signer on a loan, chalk it up as a gift -- you'll be less disappointed if things go bad, says Pantalone. Better yet, assume right from the moment you co-sign that you will have to pay the loan back yourself. "Make sure you can afford to lose the whole amount without affecting your financial well-being," she says.

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