Getting Personal
Co-signing a Loan
Question: I have a very good credit rating and am considering co-signing on a loan for a family member who has a very poor credit rating. Will her poor credit rating affect my credit rating in any way, if I co-sign the loan? Thank you, Bette, Richfield, MN
Answer: Her poor credit rating won't immediately affect you on co-signing--assuming that she then pays her bills on time. But if she defaults you're on the hook to make good on the debt. The lender will go after you for the money she owes. Your good credit rating could be ruined. It's understandable that you want to help out a family member, but co-signing a loan is very risky.
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Chris Farrell Marketplace Money personal finance guru
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Comments (2)
April 3, 2008 8:35 AM PT
Well, your credit rating would only be ruined if you didn't make good on the debt, correct? That is, as a cosigner on one loan you are only connected to that loan, and if you paid it off your credit rating would stay solid.
I have had to think about how much I can afford as I have chosen or declined to co-sign leases and loans for nieces and nephews over the last few years. Every time I co-sign, I assume that i may well have to honor the payments (despite the niece/nephew protestations otherwise).
April 9, 2008 10:31 AM PT
That has me a bit worried. I have promised to cosign a loan for a friend's daughter joining dental school this summer. She has a life insurance policy in another country. Wonder if that policy apllies in the US if something were to happen-----Any ideas?