Co-Signing For a Car Loan Comes With Huge Risk
January 28, 2009
Finding a loan these days can be very difficult. 2008 saw the subprime mortgage crisis, which jumpstarted a ripple effect in the economy, shutting down numerous credit lines and reducing the overall number of financing options across the board available to consumers.
Although the real estate market took the heaviest hit, the automotive industry was right behind it in terms of suffering. In that regards, it can be challenging for consumers to find a loan, and even harder to qualify for one.
There are many options available for consumers to try and apply for a loan, but not all of them are equal and some pose huge risk. One such option is finding a co-signer for vehicle financing. While this is a great option for getting lenders to seriously consider giving a loan to prospective borrowers, it is something that should be given the most discriminating judgment.
A co-signer provides an opportunity for a borrower with less-than-stellar credit to qualify for a loan. The reason for this is because lenders look at the credit scores and history of both applicants and decide on the likelihood of one of the two repaying the loan. If at least one qualifies, then the loan is secured, and both are committed to repaying the amount borrowed. This is great for the person who needs the loan, but the individual co-signing for it should seriously consider the seriousness of the decision. In any case, the co-signer should always prepare for the worst.
The sad truth is that no matter how much you may love a person or trust him or her, you should always know the worst that could happen with a loan you co-sign for and expect it. It may not happen, but being prepared in advance could save you financially. There have been numerous cases where borrowers that depended on a co-signer bailed out of their loans. Don’t let it happen to you.
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