VA LOAN CAPTAIN BLOG & Learning Center

Helping Out As Cosigners

By: Grant Moon 08/18/14 12:50 pm

Everyone needs a little help now and then. Lots of help or just a little, people can use a nudge to help them get over whatever obstacle is before them. A relative or someone in your family can rely on you to help when and if you can. Sometimes that request for help comes in the form of cosigning on a loan. If you’re on the receiving end of such a request, should you help and what are the consequences if you do?

The request for financial assistance can be in the form of cash to help with a down payment or it can mean cosigning on a mortgage or an automobile loan. A cosigner is often required when the borrowers have yet to establish a credit history. With regard to a mortgage, being a cosigner rarely has much of an impact as mortgages today, with the exception of FHA loans, require the occupying borrowers to qualify on their own, so your income won’t matter. And if they have bad credit, your good credit won’t overcome the bad.

On other credit requests such as a credit card or an automobile loan, it’s a much easier process and the borrowers may not need to be employed at all. This is often the case of someone in school who may only have part time income if there is any income at all and a very young credit history. But it’s important to understand that when you cosign with someone else your very own credit profile can be at risk. If there are any late payments on a credit card that are more than 30 days past the due date then both your and your relative’s credit will be impacted negatively. You may not even know the account is being paid late and may only find out after you apply for credit on your own or you pull an annual consumer credit report.

It’s great to help someone out and most are happy to do it. Just know in advance that there are risks. Make sure the person you’re helping understands their responsibility while establishing a new credit history.


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