Bankruptcy Law, Credit, Debt Relief, Student Loans, Timothy Kingcade Posts

What you Need To Know Before Cosigning a Loan

Co-signing a loan puts more than your name on the line.  It is an all too common practice that gives you the opportunity to help another person, usually a loved one.  But it is important to remember that when you co-sign a loan, you essentially agree to repay the loan yourself. For example, you might co-sign for a car you never drive, a house you never live in or even a student loan for someone else’s college education.  Nearly 40 percent of cosigners found themselves paying some or all of a loan when the primary borrower they co-signed for was unable to make the payments, according to a survey conducted by

Here are some important facts you should know before you co-sign a loan:

  • The effect it will have on your credit report. Once you cosign a loan, the debt appears on both of your credit reports.  This means, the loan can help both the primary borrower and the co-signer build a positive credit history if payments are made on time.  It can have the opposite effect if the primary borrower begins to miss payments.  These late or missing payments will land on your credit report and remain there for several years.  You can even end up paying late fees and have your wages garnished as a co-signer.  This may also limit your ability to borrow in the future.
  • You will be treated the same as the primary borrower. As a cosigner, the lender will expect you to pay the loan just as the primary borrower agreed to and will come after you for the payments.  Typically, lenders will target the person with the better potential to pay.
  • A warning about private student loans. These type loans are particularly difficult for the co-signer to escape.  Unlike federal student loans, private student lenders frequently require a cosigner since student borrowers are often young and without credit history or income.  Approximately 90% of borrowers who request cosigner release are rejected, according to a report from the Consumer Financial Protection Bureau (CFPB).

Here are some tips for managing your risk as a co-signer:

  • Know the borrower. And know them well.  Know their credit history and ability to repay the loan.
  • Review your budget carefully. If the primary borrower defaults on the loan, can your budget handle the added strain of another monthly payment?
  • Get copies of everything. In addition to the loan signing documents, request to have duplicate statements sent to you as well so you can keep track of the loan and confirm the primary borrower is not falling behind on any payments.
  • Get out as fast as you can. Have the primary borrower agree to refinance the loan under his or her name at some point in the future, as soon as their credit history and finances are better established.

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If you have any questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at