Whether you are applying for a loan for a car or a mortgage, making a big purchase is a major financial investment. The process to get a loan for one of these purchases takes some time and lenders tend to be particular with who they give loans to. A bank or lender is giving you thousands of dollars, so they want to make sure you will be responsible with it. If you are having trouble getting a loan, you may want to consider getting it co-signed. Before you decide that this option is for you, you should do a little research beforehand. A few of these basic facts can help guide you when considering getting a loan co-signed or being a co-signer:
Checking out your finances beforehand
Before you head out to a bank and fill out loan applications, you should check the state of your finances. A lender will be more inclined to approve your loan if you have a good credit score and no delinquencies. You can inspect your credit by accessing a credit report. This document will have all your credit history including every line of credit you have opened and any negative marks such as late payments. If you think your credit may not be up to par, the best thing you can do is repair your credit or consider getting a co-signer for your loan.
Understanding the basics of co-signing
If you do not have a good credit rating, you may want to ask a friend or family member with good credit to co-sign the loan. Having a cosigner on your loan can help you get approved or help build up your credit, but it comes with some caveats. If you are co-signing a loan with someone who has bad credit, be aware you will legally be held accountable if the borrower does not pay the loan back, which will hurt your credit score as well. So, make sure you understand the rules before you agree to be a co-signer.
If you are nervous about the borrower not paying the loan back, there are a few precautions you can take. Discuss with the lender and ask them if they can alert you if the borrower fails to make a payment.
Along with getting a notice from the lender, negotiate with them in regards to how you will be punished for a delinquency. See if you can get late charges or collection notices off your list of responsibilities. This way you won't have to worry about these showing up on your credit report.