Personal Finance presentation, co signing a loan that prepare to get financially fit by practicing personal finance, co signing a loan. So the general scenario with regards to co signing a loan is that you have person a person a trying to get a loan from a bank or some other type of financial institution, that financial institution wanting to make money through providing the loan through the interest they would generate from it,
but not fully trusting the person who is looking to borrow the money with regards to their credit history, or lack of credit history, or any other kind of problem that the lender the bank feels is going to increase the risk to them beyond the ability to offer the loan, then the person a my ask Person B in order to cosign the loan, that means that person B would be coming in and saying, hey, look, I trust this person, so much so that if they don’t pay off the loan, then I will take on the responsibility on their behalf.
And if the financial institution is comfortable with person B’s credit, that may then allow the the lender, the bank, to be to be more comfortable, lower the risk, which could then allow the process to be moving forward and or possibly allow for more favorable conditions in that event. So the CO signing of a loan is when you agreed to be responsible for the loan payments in the event that the other party fails to make them. So someone else wants to loan, they’re trying to get the money. If you’re the cosigner, you’re saying, Okay, I’ll support you on this, you better make the payments, because I’m now taking on the responsibility in order to permit you to make off take on the loan.
So co signing a loan, the cosigner is generally only necessary if the lender feels the borrower was too risky without it. So typically, you wouldn’t really need a cosigner if you’re dealing with someone that has very good credentials with regards to the borrower, because the lender would then feel okay in and of themselves in order to have them borrow the money in the event that they do not feel secure, possibly because there’s credit problems or possibly because they don’t have a credit history. Younger people often have a problem with regards to a lack of credit history, then you might have the event that’s when the event could happen that you would need the cosigner in that case. So could you afford it if the borrower defaulted?
So then if you’re asked to be a cosigner, then someone could ask you and basically say, it doesn’t cost you anything, I’m going to pay off the loan, it’s just to lower my credit, it’s just so that I can get this particular loan. And obviously, on your side, if you’re the one that’s being asked to sign the loan, you’re going to be saying,
Well, if you do default on it, obviously the bank doesn’t fully trust you because you wouldn’t need to go inside of and so if you do default on it, then you know, what would be my responsibility, you want to be able to to make sure that you know if there is a problem, you can’t support it at that point. So you just what would be the worst case scenario if the payments weren’t made? Could I afford it in that instance.
So if the borrower doesn’t pay the cosigner is liable for the full amount plus any late or collection fees. So if payment is missed, the creditor may collect from the cosigner so obviously again, if if there’s any problem, that’s the point the institution can go after the person that did the code signing, and you want to make sure that in the event that that happens that you can you know, you could be okay with that and be able to to pay it off if necessary.