A few things you should know about co-signing a loan.

You may be asked by a friend or relative to co-sign a loan on their behalf.  Before you agree to co-sign, there are a few things you should consider first.

When you co-sign, both the co-signor and co-signee are 100% liable for the co-signed debt.  Although the co-signee may have every intention of fully repaying the co-signed debt, an unexpected job loss, or a medical issue affecting the ability to work and earn income, could affect their ability to repay.  In these cases, the lender will pursue the co-signor for 100% of what is owed as well as applicable service charges, additional interest and late fees; not just 50% of the amount borrowed.

Co-signing a loan is essentially the same as you getting your own loan.  The co-signed loan will appear on your credit report and will affect your debt service ratio.  Until the co-signed loan has been fully repaid, its mere existence, regardless of whether the co-signee is making timely payments, will affect your ability to borrow in the future.  The co-signed loan combined with other debt in your own name could push your debt service ratio to a point where a lender cannot qualify you for additional credit simply because your current debt service ratio is too high.

If you agree to co-sign, you must ensure you can afford to fully repay the co-signed loan in the event the co-signee cannot later on.  If neither party can make payment later on, both credit reports and credit scores will be negatively impacted.  Furthermore, the lender can take legal action to collect against the co-signor which may include the garnishee of income, bank accounts, or action against property owned by the co-signor.

If you agree to co-sign, you should request copies of overdue payment notices be sent to you promptly, as well as the co-signee.  If the co-signee is late making a payment and you are not notified, you will not have the opportunity to make up for the late payment in a timely manner.  The existence of late or missed payments will negatively impact your credit and drag your credit score down.

If you or someone you know is struggling with debt or became liable for co-signed debt they cannot afford to repay, please do not hesitate to contact our office for a free consultation to explore your options.

At Jaime Johnson & Associates, you will deal directly with a Licensed Insolvency Trustee; from the beginning as we explore all of your debt relief options, to the end as you achieve debt relief.  For a free consultation, please call or text (506) 645-1814; email jaime@tackledebt.ca; or visit us on-line at www.tackledebt.ca.

We are pleased to offer Debt Consulting, Debt Relief, Consumer Proposal and Bankruptcy services to the following areas: Saint John, St. Stephen, St. Andrews, St. George, Grand Bay-Westfield, Fredericton, Oromocto, Rothesay, Quispamsis, Hampton, Norton, Sussex, Petitcodiac, Moncton, Riverview, Miramichi and all places in between.