Co-signing for a Child’s Loan

As children get older, the things they need get more complicated. As a parent of a young adult, you will probably get asked to be a loan co-signer. This is a decision that requires a lot of consideration. To help you decide whether or not you want to co-sign a child’s loan, we here at PaydayLoansCashAdvance have put together a few ideas to help you decide.

Advantages to Co-signing a Loan

When you co-sign a child’s loan, you give them the opportunity to get more money than they would have been able to qualify for on their own. This can help them to get nicer cars and better apartments, and it can also save them money by getting them a lower interest rate. When you co-sign a loan for your child, you give them a lot of advantages, but there are downsides to being a loan co-signer that must be considered first.

Disadvantages to Being a Loan Co-Signer

If your child defaults on their payment, you, the loan co-signer, will be responsible for making those payments. According to the FTC (Federal Trade Commission), about seventy-five percent of all Co-signers eventually become responsible for repaying the loan on their own. This means that you may likely end up paying this debt for your child.

If your child defaults on the loan, the lender will contact you for the money as soon as they can. By the time they reach you, however, there may have been late fees or extra interest added to the account, and this can increase the amount that you owe significantly. If the lender has to sue for the money, there may be legal fees or collection fees added to the account, and that too can cost you a lot of money.

Even if your child does not default on the loan, there are credit ramifications to being a loan co-signer. When you co-sign a loan, you increase the amount of debt that you have. Thanks to your now higher debt to income ratio, you may have trouble borrowing money that you need. If you were planning on borrowing money, you need to keep in mind that co-signing your child’s loan may prevent you from getting approved on your own loans.

The payment history of the co-signed loan will also appear on your credit report. That means that if your child makes a negative payment that it will hurt your credit score. Based on all these factors, you should only agree to be the loan co-signer for loans that you can comfortably pay back, and you may want to monitor your child’s finances to ensure that they make the payments on time.

Points to Consider

If your child asks you to be their co-signer, here are some things that you should do first:

  • Explain how being a co-signer could affect you financially, and make sure that they understand why you may be hesitant about it.
  • Consider starting with a small loan to test the waters. A credit card with a $500 to $1,000 limit may be a good starting point.
  • If you are co-signing for a car loan, you need to remember to have your name on the car’s deed. This way, you can sell it if your child stops making payments.
  • If you are co-signing for an apartment, you need to contact the parents of the other roommates. If you all co-sign the lease then you won’t be stuck with the bill alone after a wild party or other event that causes damage.
  • If your child is asking you to co-sign a student loan, you should ask them to investigate other options that do not require a loan co-signer. Only private lenders request co-signers, and there are plenty of federal student loans, scholarships and grants that do not require a co-signer.
  • If you decide to move forward and be a loan co-signer, you should create an arrangement where the lender will contact you in the event of a missed payment. This ensures that you can stay on top of things without facing late fees or expensive penalties.

Being a loan co-signer carries a lot of risks. However, it can help your child to get a leg up in the financial world. If you can afford the risk, you may want to consider saying yes when your child asks you to co-sign. things that the important thing is that you are well aware of the risks.

The operator of this website is not a lender.
This site will share the form information provided by the consumer with one or more lenders.
This site can connect you with a cash advance lender based on your form and lender requirements.
Not all customers will be connected with a lender, and not all forms will be approved by a lender.
PaydayLoansCashAdvance cannot guarantee the amount of funds that may be extended if a lender approves the form.
*Not all lenders can provide up to $1,000. Consumer loan amounts vary bases on creditworthiness.
Lenders tend to provide upper range loan amounts to returning customers. Cash transfer time may vary between lenders.
Funds are not available until the next business day. Cash advances are not available in all states.
Lenders may undertake credit checks or otherwise verify the consumer’s social security number or other information.
If and when lenders preform credit checks they are ran via specialized credit bureaus.
Late payments of loans may result in additional fees or collection activities, or both.
Non-payment of credit could result in collection activities.
Each Lender has their own terms and conditions, please review their policies for further information.
Every Lender has its own renewal policy, which may differ from Lender to Lender. Please review your Lender's renewal policy.

Please refer to our Privacy Policy for important information on the use of cookies.
By continuing to use this website, you agree to the Notices and Disclosures and the Privacy Policy.

Copyright © 2014 All rights reserved.
3172 North Rainbow Boulevard #1212 Las Vegas NV 89108