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Opinion: Think hard about being a co-signer on a loan

Following is a hypothetical that many good-hearted persons with sterling financial histories and impeccable credit ratings might want to duly consider. The fact pattern is quite common and can unquestionably be verified by many people for whom its presentation is far more than theoretical.

It goes like this. A loved one, close friend or other valued acquaintance approaches you and asks for your signature on a loan that he or she wants to take out. The reason why your help is being solicited is that for one or more reasons -- a shaky credit history, perhaps, lack of collateral, insufficient job income and so forth -- a would-be lender is less than jazzed to hand over any money.

With your signature on the loan as a co-signer, though, the tide might turn. In other words, a lender might have a heightened comfort level knowing that, if the person receiving the money does not timely pay it back, you can be legally pursued and tasked to do so.

Certainly there are instances where all of that works out fine and, as a co-signer, you never hear a boo or whisper from a creditor.

Conversely, though, bad things happen with loans all too often, and co-signers find to their chagrin that things can turn very ugly if Party A is not making timely loan repayments.

What can happen to a co-signer if things go south on a loan? Succinctly stated, virtually everything that can happen to the other signatory. A debt collector might come calling. Wage garnishment might be attempted. A FICO score might plummet. Other equally dismal scenarios could surface.

In other words, the need for debt relief could ultimately challenge a loan co-signer in the same manner that it does the primary borrower.

There is not much upside in playing the role of a loan co-signer in most cases, notes a columnist in a recent article on the subject, who adds that “your possible downside is much greater.”

That downside and any debt-related challenges accruing from it can be candidly discussed with a proven debt relief attorney, who can often provide timely and beneficial advice for dealing with financial problems.

Source: The Star-Ledger, “Your Money: the perils of co-signing a loan,” Karin Price Mueller, April 8, 2014

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