Your child needs $10,000 to make up a college tuition shortfall. Your single-mom sister wants to buy a house with a yard for her kids. Your nephew has a brilliant idea for an exciting new business he says is guaranteed to make millions.
At some point, a family member (or a friend) may approach you to co-sign a loan to make a dream come true.
On the surface, agreeing to be a co-signer seems like a helpful, low-risk — and even benign — gesture of support.
But it’s far from that.
The bottom line is that you are left holding the bag for the entire loan — no matter what — if the person should happen to default, warns Jason Hull, owner of Hull Financial Planning in Charlottesville, Virginia.
“It doesn’t matter if the person who asked you to co-sign has a sob story that would hit the top of the country charts if it was made into a song. The bank won’t care,” says Hull.
So is there ever a reason you should sign on the dotted line to vouch for kin or comrades on a loan?
Absolutely not, agree the experts. And here’s why.