If you’re fortunate enough to have good credit, there’s a good chance that someday a loved one will call asking for you to cosign a new loan or a credit card. Maybe it’s an adult son or daughter without much of a borrowing history or one who’✃s taken a few hits in recent years and needs a cosigner to buy a car. If you’re likeꦯ most people, your impulse is to lend a helping hand by adding your signature to the loan. But before signing on the dotted line, make sure you know what you’re getting into.

Cosigners can face significant repercussions if the primary borrower can’t make good on his or her payments. Were this not the case, having a cosigner on the loan—regardless of how high their 澳洲幸运5官方开奖结果体彩网:credit score—wouldn’t matter much to the bank. But because the lender knows it can go after cosigners for overdue payments, that second signature can make a world of 澳洲幸运5官方开奖结果体彩网:difference in the loan approval process.

The Potential Fallout

What’s the upshot for the cosigner if the primary borrower can’t make the loan payments on time? The creditor may start contacting you seeking the overdue amount, using the same tactics that they use on lapsed borrowers. That means they could sue you and, if they win, 澳洲幸运5官方开奖结果体彩网:garnish your wages. 

Of course, by the time a 澳洲幸运5官方开奖结果体彩网:collection agency starts calling, there’s a good chance the overdue payments have already found their way onto your 澳洲幸运5官方开奖结果体彩网:credit report. So despite the fact that you’re not even borrowing the money in any re⛦al sense, your credit could start to take a hit. All of a sudden, obtaining loans—or at least gettinꦗg preferred interest rates—can become a big challenge. 

Keep in mind, too, that you could remain on the hook even if the person you’re helping out files for bankruptcy. If the note you cosigned was part of the court filing, 🍸the creditor can still come after you in hopes of collecting on it.

Even if you acted as a 澳洲幸运5官方开奖结果体彩网:guarantor on the loan rather than a cosigner, you’re in pretty ♔much the same boat. There are some slight differences between the two. For example, with a guarantor, the lender has to pursue the primary borrower before contacting you. But you’re ultimately responsible for any late pay𓆉ments, just as you would be if you had cosigned. 

Before You Sign

To avoid any unnecessary headaches later on, it’s🎃 important to think through your decision before putting 🌞your name on someone else’s loan. Here are three tips that can help keep you out of trouble:

Understand the Consequences

If you’re a cosigne൩r, the creditor has just as much right to collect from you as from the actual borrower.

Stay in the Loop

The only thing worse than having a collection agency breathing down your neck is not knowing ahead of time that the loan wasn’t being paid. Before cosigning a note, the 澳洲幸运5官方开奖结果体彩网:Federal Trade Commission (FTC) recommends asking the creditor to notify you if the borrower falls behind on their debt. For peace of mind, make sure to g🦋et this agreement in writing. 

Be Careful About Collateral

If you put up assets to help someone secure a loan—whether it be your car ಞor an expensive piece of jewelry—know that the bank can sell them to help pay off unpaid debts. Make su🎐re you’re ready to handle that reality in a worst-case scenario. 

The Bottom Line

It’s easy for those with good credit to follow their heart and instinctively cosign for loved ones who need a loan. Even the 澳洲幸运5官方开奖结果体彩网:best lenders allow cosign🐽ers or co-borrowers on most loan products. But to avoid trouble down the ൩road, it’s always a good idea to take emotion out of the equation and think through the consequ🐲ences.