To co-sign or not to co-sign-that is the question!

Have you ever been asked to co-sign a loan or credit card application for someone?  You may want to think twice before agreeing to sign on the dotted line.

Many lenders and credit card companies have tighten up their lending standards, with one way being the requirement of a co-signer. Before you sign for family or friends, know what you're liable for.

Like many prospective co-signers, you may not realize that:

• The debt may be yours. Think about it: A lender or card issuer wouldn't ask for a co-signer if it thought it could collect from the borrower. If the borrower can't or won't pay, you're next in line.
• Your credit score could drop. Suppose you co-sign for your college-age child and he or she can't make the payments. Their credit rating--and yours--is affected. And, that ding on your credit report could mean that your own loan application is denied.
• You could be sued. Say you sign for a credit card for a friend and he ends up with thousands of dollars of debt. The credit card company takes him--and you--to court to collect. You have to reveal all your assets and risk losing them to pay for purchases you didn't make.

Co-signing isn't always a bad thing.  It's often used as a way to teach money management to responsible teenagers, especially when you provide the child with education about how to use the card or the importance of timely loan payments.  You can place limits on how much can be spent on the card. Some cards issuers even provide notices to parents when their kids approach the limits.

Co-signing for people outside your immediate family can be a tough call. "Just say no" could be the best policy. Explaining the financial risks may be the best way to express why you won't be a co-signer. That keeps emotion out of the conversation and maintains harmony in the relationship.

Whether it's your kid, another family member, or your best friend asking you to co-sign, you--and the co-signer—should sit down and discuss the "fine print" details before you pick up the pen,

It’s Only Money

John