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Looking for some advice. My best friends daughter,who I've known since the day she was born, has asked if I would co-sign her loan for the first year of college. The total loan is $14,000. How would this affect my credit score and overall credit situation? In the past few years have managed to raise my score into the 680's and finally have 3 months worth of emergency funds set aside. I currently have a mortgage, car payment and about $4,000 left to pay off on my credit cards. Her mother says they will pay the interest only payments that are due from the beginning but knowing their financial situation and that the college is out of state so the daughter has no job lined up as of yet I am concerned that I will become responsible for the payments.
I truly want her to be able to go to college but am afraid of the potential repercussions to my financial health. Also, how can I tell them no without causing a strain in the friendship? If you have question please ask and I will be grateful for any advice.
Simple advise....dont do it. Period. If she fails to make the payments or defaults, your credit will go in the crapper.
The daughter needs to go to a state college IN STATE that she can afford and finance. If she cant afford her freshman year, how will she be able to finance the following years.
Tell them that a loan like that will destroy you debt to income ratio and you hurt your credit score.
Thanks for the response.
She has taken some classes at community college here and will have credits applied to new school, to be entering as a sophomore. Even with allowances and grants from new school the balance owed is 14,000 which I'm guessing is mainly from dorm expenses.
Yes I am very afraid that the payments won't be made or be late.
And if I do it this year the possible expectation to finance the next years also.
Realistically I know I can't do this. Just afraid of the friendship/emotional repercussions of turning them down. Don't like being put in this position to begin with.
Thanks again for your advice.
@Anonymous wrote:
Realistically I know I can't do this. Just afraid of the friendship/emotional repercussions of turning them down. Don't like being put in this position to begin with.
Thanks again for your advice.
They should have had the same thought of asking you in the first place.
I would just explain that you would love her to be able to go and do what she wants to but tell them that your score and current DTI is at it's limit as it is and that you can not swing that kind of cosign. If there is anything you can do in terms of letters of recommendation for scholarships/grants/providing personal references for jobs then you will be thrilled to do so but that you cannot make a monetary commitment at this time
Thanks to everyone!
I spoke to my "niece" tonight and explained the situation. She seems to understand and is starting to make her own plans. She is looking into deferring enrollment until next year and realizes she has to get a job in the meantime.
Have not spoken to her mother yet about any of this. Hopefully things will be ok with her.
Appreciate everyones advice
She just got her associates degree this June from a community college. The college she wants to go to is an art school and they counted 33 of her credits to start her as a sophomore. The art specific (photography major) classes that she needs are not available at our community school.