Why would a bank
or credit union only have one customer to pay a bill....when
they can have
two?
With more and more poor credit ratings on
the books, creditors are turning more towards
cosigned debts as a method of repayment.
A
cosigned loan obligates two people to repay a
loan instead of one.
Depending upon your
perspective, the loan can be an extraordinary
benefit or a major liability.
For a creditor,
another signatory creates a safety net when a
primary signor has a shaky financial history.
For the extra signor, the loan creates the
financial responsibility of paying the entire
debt.
Consider this
illustration: John Smith wants to purchase a
motor scooter from Richard for $2,000. John
does not have the up-front cash to pay Richard
and asks for a payment plan. Richard runs a
credit check on John and discovers John has
missed several payments on previous car loans.
Nervous about recovering the entire $2,000,
Richard tells John he will sell him the
scooter only if John's father, Bob, signs the
contract as well. Trusting his son will pay
for the scooter himself, Bob happily signs the
contract.
A few months
later, John moves to Michigan and takes the
scooter with him. He has not made any of the
payments on the scooter to Richard. Richard
demands John make his payments, but John tells
him he cannot. Richard then sues Bob for the
entire $2,000. Under the terms of the
contract, Bob must pay the entire $2,000. Bob
has no legal defense!
Unfortunately,
the above example happens all too often.
Studies have shown that for defaulted cosigned
loans, three out of four consigners are asked
to repay the loan.
If you are considering
cosigning or asking someone to cosign for you,
be aware of the risks!
If you must cosign,
make sure you can afford to repay the loan on
your own.
Be sure that all parties receive a
copy of the contract.
And, if you are a
consigner, write a letter to the lender asking
for a notification of any future default. That
way, you can prepare for any default in
advance and will not be forced to pay the
entire amount right away.
Find Out
Your Debt Options.
Get Your Questions Answered.
Call
today to set up a FREE Debt Consultation.
662-844-7949
24 Hour Appointment line:
662-842-HELP(4357)
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