February 14th, 2013 11:52 AM by Jill Kohler
You can be a big help by agreeing to co-sign a loan or becoming a co-borrower on a loan to someone who doesn’t have established credit. But co-signing or co-borrowing is serious business. You could suffer serious financial consequences even if you know and trust the person who is taking out the loan. Many lenders take a cautious approach to first-time buyers. Without credit history there is little for them to go on. It’s not unusual for them to require a co-signer. About 10 percent of borrowers need a co-signer. As a co-signer you are obligated to repay the debt in the event the borrower defaults. Many borrowers don’t realize that the loan can affect their own ability to obtain financing. One of the biggest disadvantages to co-signing a loan is the effect it may have on a cherished relationship with a family member or close friend.