If you have a bad credit score and have a hard time acquiring a loan, you can always consider a cosigned loan. This loan type is offered to individuals suffering from a low credit score but who need financial assistance.
However, aside from providing the required documentation for the cosigned loan, you must also provide someone who will agree to become your cosigner.
Here are some do’s and don’ts that you must follow in choosing your cosigner.
The Do’s that You Must Consider
Do choose someone you trust. Being a cosigner is a huge responsibility and choosing someone you trust is one of the most important things you should do. You have to remember that the cosigner will be responsible for paying for your debt if you default, and if you choose someone you cannot trust, how can you make sure that the cosigner will take on the responsibility.
Do tell your cosigner the responsibility associated with being your cosigner. You should explain their role on your loan before assigning them as your cosigner. The cosigner should be aware ahead of time of having enough time to decide if cosigning your line is the right choice for them. Lenders such as CreditNinja would love to help you the cosigner go through their responsibilities before agreeing to the agreement so that they can understand the situation better
Do always keep in mind that your cosigner will have an equal responsibility with you as the principal borrower. This thought should always be present in your mind as you carefully choose a candidate to become your loan cosigner. Should you be unable to fulfill your loan obligation, it will be necessary for the cosigner to finish paying off your loan.
Do consider your capability to pay before you choose for a cosigner. You have to remember that even if you choose the best cosigner that will take full responsibility for your loan if you default, it is still best that you know your capacity. If you are not 100% sure that you can fulfill your obligations in the loan, you must know you are putting the cosigner’s financial health at risk.
Do understand that you are directly responsible for the downfall of your cosigner’s finances if you fail to pay your loan and default. It is why thinking many times before dragging someone into your loan endeavor would be best.
Do prioritize your relationship with the cosigner over your desire to acquire a loan. If a person you think best fits to be your cosigner refuses to agree, don’t force them to.
Do consider the cosigner’s health and age. Some lenders force their borrowers to pay their loan in full when the cosigner dies. These lenders do not give exemptions even if you are a good payer who religiously pays your loan in time. Your cosigner is the only security the lender has on you, which means that nothing acts as a security for the lender when the cosigner passes away
The Don’ts You Must Avoid
Don’t consider inviting a distant relative to cosign for your loan. Unless you have constant communication with that person and have a strong relationship, choosing a distant relative would be a mistake. It doesn’t matter if that relative of yours is wealthy or they own a huge business; it would not be the best decision to ask them to cosign with you without a regular connection.
Don’t choose someone you are not comfortable sharing your financial information with. Once you ask someone to cosign for you, they will possibly ask you to disclose your financial situation before they approve to be your cosigner. This ensures the consignee’s safety and understands of the situation they are getting into.
Don’t hesitate to ask your parents to cosign for you–most individuals who need a cosigner turn to their parentsfirst before considering other people. Your parents are the ones who know you more than anybody else which is why it might be easier for you to convince them to cosign for you.
Don’t keep a secret with your cosigner about your finances, whether negative or positive. It would be best if you lay it all down before signing the loan agreement with your cosigner. You are applying for a consigned loan enough to assume that you are having financial problems.
Don’t hesitate to ask as many questions as you like of your cosigner. Even though you are the one who is asking a favor, it is still best that you know the things you want to know about your cosigner as long as it is related to your loan, such as their finances, their job, etc.
Even though there are still loan options for people with a bad credit score, it is not recommended to neglect your financial situation. It is still best that you take care of your credit record to acquire a loan without having to worry about who you will invite to be your cosigner.
Now that you know the do’s and don’ts to follow in choosing a cosigner for your loan, you can list the people you think qualify and talk to them to see if this is a responsibility that they are willing to take on.