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Should You be a Co-Signer?

How much do you know about credit?

Become a savvy financial consumer! Learn a little bit more before you sign on the dotted line.

Take co-signers, for example. You've probably heard the term.

Someday a loan officer may ask you to find one—or a friend may ask you to be one.

A co-signer is like insurance for the lender.

Let's say you're the one who needs a co-signer for a loan. A co-signer is someone other than you who signs the loan note. The co-signer agrees to repay the loan if you fail to repay as promised.

Co-signers are jointly liable for loans, which means that the lender can look to them for payment. Credit card companies sometimes require co-signers, too.

When do you need a co-signer?

Credit unions and other lenders ask for co-signers for several reasons.

Maybe this old pen has some credit history!

It's all about risk

Lenders are constantly aware of risk, or potential loss if the borrower doesn't repay. All loans carry a certain amount of risk, so lenders look at four primary considerations that affect their decisions to approve or decline a loan.

These primary considerations are called the 4 Cs of credit:

If a lender is uncomfortable with one or more of an applicant's four Cs, the next step is to ask for a co-signer.

Who could co-sign for you?

Start the search at home. Most parents co-sign for their teenager's first credit application.

However, anyone—friend, relative, co-worker—can co-sign for you. That is, of course, if that person is 18 or older, has a good credit history, and wants to do it!

I'll sign, you pay!

Your co-signer doesn't relieve you of your responsibility to pay back the loan as promised. If you don't, it'll affect your credit rating and that of your co-signer's.

That could be harmful to your relationship. If your co-signer has to pay off your loan, she isn't going to be very happy with you.

Should you be a co-signer?

One day, a friend may ask you to co-sign a loan.

Now you know why you need to consider the request very carefully.

Your money and your credit history will be on the line!

True or False: Actor Nicholas Cage plays a descendant of Benjamin Franklin in the “National Treasure” movies. Click Ben's head for the answer.
FALSE: Cage’s character, Benjamin Franklin Gates, is named after the Founding Father.
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