Having good credit is very important for all individuals because it is going to affect your ability to purchase things in the future. If you have decent credit, you may be able to get a credit card but it will have high interest applied to it. You may be able to buy a vehicle or qualify for a home loan, but you are going to pay more in interest for them as well. All of these scenarios are going to cost you more money in the long run - and it can add up to hundreds of thousands of dollars.



There are many reasons why a person may have bad credit - they could have a problem with managing money. They can also have gone through a divorce, lost a job, or had huge medical bills that affected the amount of money available for paying their bills as they once could. Other individuals don't have any credit established so it is also hard for them to get the credit they need at all, let alone at a decent interest rate.

You can be sure it is never easy for someone to have to approach another individual to co-sign on a loan. While you may be flattered that they came to you, always look out for your own well being first. You certainly don't want to ruin your own credit because you have through a life boat out there to someone else. Any time you co-sign on a loan there is a risk that it won't get repaid according to the terms. That means the lender is going to be coming to you for what is owed.

Some individuals have found being a co-signer on a loan makes it difficult for them to get a loan of their own. It can also be very stressful for the relationship when one individual is a co-signer. Seeing someone blowing their money and not making those payments can result in the relationship not being salvageable.

Even when the other party is doing a fabulous job of making the payments, there can still be issues you need to be aware of. You don't want your next credit application to be turned down because the lender is using a calculation that shows your debt ratio compared to your income is too high. They will likely be including all of what is due on that loan you co-signed on. If it is a high dollar amount as a well as has a long term applied to it, this could be damage you can't offset.

You need to carefully evaluate the situation to determine if you are willing to be a co-signer or not. If the person knows you well enough to ask, then you should be able to honestly talk to them about it. Discuss the situation completely including what they need the loan for, and the circumstances that have lead them to need assistance. You will have to use your own judgment to determine if this is something you are willing to help them with or not.

You need to go over all the details of the loan with both the lender and the person you will be co-signing for. Make sure you know how long the loan is going to ask. You should be able to get instant notification from the lender if the account has not been paid on time. You should also be able to ask them for verification of the payments without any hesitation on their part. Make sure they keep the lines of communication open and tell you if they are struggling to keep the account current.

If you don't want to get yourself involved in co-signing a loan for someone, then stand firm. You shouldn't do it because you feel obligated or because you feel sorry for them. There are other things you can do to help them out. For example, you can offer to baby sit for the individual a few nights a week for free so they can pick up a few extra shifts and earn extra money.