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In many instances, it would be better to just give them the money as a gift than to cosign. If you can't afford to pay the loan or would be resentful about having to do so, then you shouldn't cosign.
It seems like almost every situation one hears about where a family member has co-signed a loan/mortgage/other for another ... turns south and results in hard feelings and damaged relationships. Of course, it also seems like the situation most often arises with family members who repeatedly mismanage their own resources.
In our case, I wouldn't hesitate to co-sign for our grown children, but, then, they have always shown themselves financially responsible and astute -- and I can't imagine them ever asking. With others, I'm thinking, "If I can afford to 'give' it to them, either in total or part, I would do that, rather than co-sign.
My son has raised the concept of a 'family bank' as a means of providing funds, with a sense of financial responsibility, for children ... and even adults in difficult straits. I'm thinking about this and it is starting to sound like a viable approach for things like college funds, etc. -- and ultimately, to build a family legacy.
One Sister I Floated a "Bridge Loan" 60K for two Months when she was between buying and selling her townhouse, and getting a house. Had no problem doing it I know she would pay me back.
Other Sister I Gave/Loan'ed her 2K in a family Emergency, I don't expect to see that 2K again.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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My own financial situation makes no difference to the question of cosigning for a family member, it's their financial situation that's important. Suppose, for example, that one of them has just started a great new job which will result in double their current income, but they have no credit or it's mediocre due to having been laid off previously. If they needed to buy a car to get to that job, I might go ahead since they should be able to make the payments on time without any problem. Even if I had $6,000/month more than I need to live on, I would not cosign for any family member that was overextended, barely making it, or had a history of financial issues.
I'm NOT one who believes you NEVER cosign. Because there are instances when it's OK.
As long as you know it's YOUR debt, and if the other person doesn't pay -- YOU pay -- and you can afford that risk, then go ahead and co-sign. IF not, then don't ...and don't apologize for NOT co-signing. Either you can afford it or you can't. I don't see why it's that complicated. People need to put their big girl/boy pants on and have some ba lls and say I can't do it, because I can't afford to take that risk. PERIOD.
And if the family member or friend pressures you -- say "Sorry. I can't put myself out on that limb. Because if it gets sawn off -- YOU certainly can't help ME. We'd BOTH be in the toilet." (so to speak)
(2 examples...In my case I co signed for my 85 year old mom to get new furniture. She had investments and steady Soc Sec. and a good FICO, but I guess they looked at her age and didn't approve the amount we wanted. (5K) So I co signed, for an 18 month no interest furniture store financing account. I knew she had the income, I was already managing her finances, and so I knew I'd pay it out of her money.
On the other hand my broke-a$$ brother co-signed for my nephew to get school loans...25K I think. Still to be seen how THAT works out)
Only if I could afford to pay the whole thing off tomorrow and still have enough for all my goals. Even then, there would need to be a good enough reason to justify the relationship risk. If they could have been saving up or building their credit, and did not do so, I would be very reluctant. Finally, I would need to actually have a credit score myself - otherwise
I doubt I could even help much by co-signing.
If I cosigned I would have to be in a spot where the money wouldn't matter to me. I'd also expect that I would be the one making the payment and the other party would be paying me
The co-signer's finances will very much matter if they have to repay the loan.
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