Co-Sign for Family or Friends? Need to know!

Co-Signing has always been an option when helping a family or friend get approved for a loan. It's not a bad thing if done correctly, and is used all the time to allow someone who might not qualify but can afford to pay a loan get approved. But there are some things to consider when you decide to help someone out. Remember that when you co-sign for a loan this means you become part owner of the debt acquired and the payment owed monthly.

So what happens when you want to re-finance your property or go to apply for a loan?

The bank consider the amount you co-signed for as part of debt that you owe and the monthly payment will be considered as your monthly debt.

So how do you prove to the bank that the other person makes the payment?

1) NEVER take cash from the person you co-signed for and make the payment yourself. shows the bank that you are the person making the payment

2) Try to have the individual you co-signed for make the payment directly on the loan.

3) If you feel more comfortable making the payment to ensure that it gets made every month. Have the person write you a check and not pay you in cash. Make sure they reference the loan # on the memo & payment period. You make the payment by check as well or online and reference the same loan #.

The key to remember is that banks want to see a paper trail for 12 months at minimum. This will allow the bank to see that the payment is not being made by you, this will help them not to consider this your debt and hold it against you. If you don't do this correctly and keep a paper trail, this could mean denial on a loan in the future for you.

if you have any questions please do not hesitate to call or email.