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To sign or not to sign, is that the question? Or does it take on a new meaning because it's your child? We want our children to have all the things we didn't, but how far are we willing to go? Though the question here is about cosigning your child's credit application, the answer is virtually the same as if it were another relative, friend or business associate.

Before you allow emotion to get in the way, make sure you understand what cosigning involves. Federal law requires creditors to give you a notice that explains your obligations.

Cosigners Often Pay

Cosigners end up having to pay more often than not. Why? Because as a cosigner, you're taking a risk that a professional lender won't take. If the borrower met the criteria, the lender wouldn't require a cosigner. How well do you know your child? How well did you teach your child money management?

In most states, if you cosign and the borrower misses a payment, the lender can immediately collect from you without first pursuing the borrower.

If you do cosign, consider this information:

a.. Be sure you can afford to pay the loan. If you're asked to pay and can't, you could be sued or your credit rating could be damaged. Even if you're not asked to repay the debt, your liability for the loan may keep you from getting other credit because creditors will consider the cosigned loan as one of your obligations.
b.. Before you pledge property to secure the loan, such as your car or furniture, make sure you understand the consequences. If your child defaults, you could lose these items.
c.. Ask the lender to agree, in writing, to notify you if your child misses a payment. That will give you time to deal with the problem or make back payments without having to repay the entire amount immediately.
d.. Make sure you get copies of all important papers, such as the loan contract, the Truth-in-Lending Disclosure Statement, and warranties if you're cosigning for a purchase. You may need these documents if there's a dispute between your child and the seller. The lender is not required to give you these papers; you may have to get
copies from your child.

Sure, you have a sentimental attachment for your child, but you have to decide whether you are helping him or her financially-or driving a wedge between the two of you.