Co-signing on a personal loan.. How's it work?

Creditplz · ‎10-09-2016

So today my cousin who I consider a brother to me asked a big question "would you consider co-signing on a $7000 personal loan" I let him know that it's something I would have to think about and get back to him about... But his scores are all 575-600 not because of bad money management or no job.. Simply because of a $37,500 medical expense that he could not pay and it went into collections. He has one CC with a $500 limit and 2 years of payment history that is good, I'm considering doing it but I want to know....

Even with my 748 TU and 736 EQ that I'm assuming navy will pull, would they even give him the personal loan with his 577 EQ and 592 TU? He owes $40/500 on his only CC

Anonymous · ‎10-09-2016

With you co-signing with him, he should be able to get it even with his scores. You'd have to be the primary and him the secondary and will be based on your scores primarily. Remember, anything that happens with the loan will affect you too. So think long and hard about it.

Creditplz · ‎10-09-2016

What do you mean by me being the primary and him being the secondary?. Would I have to apply and add him as the co signer? Or would he apply and add me as a co signer?. And I'm still thinking about it... I think I'll need to talk to my wife before I do anything to get her input on it..

Anonymous · ‎10-09-2016

I'd talk to your wife before making a decision. I've seen a number of stories on this board in which loaning money to family did not end well.

grillandwinemaster · ‎10-10-2016

Yes, absolutely talk to your wife and definitely get her input. You being the primary means the loan Will be based off your credit history and income. Your cousin Will really just come asking for the ride. Everything that happens with that loan Will be on your credit report. If he's late it Will be on your credit report. If he pays it off on time, if Will be on your credit report.

Something else to think about, if he becomes disabled, or worse...

It's your loan to finish paying.

In the end, it's 7k, not 70k...

Also, it Will count against YOUR dti. If you or your wife need a loan of your own, or need a car, that loan Will be factored into your dti.

Just a few things to think about.

Current Scores 3/2016 Equifax 676 Transunion 697 Experian 648 Goal Scores: 720's accross the board. Gardening Goal: 3/2017

Anonymous · ‎10-10-2016

I also agree discussing this issue with your significant other. Financial decisions IMHO should be made together. It's a partnership.

Creditplz · ‎10-10-2016

Yeah I think once I talk to my DW and if I do finally go ahead and co-sign I'm going to have Auto-pay on it and make sure it's paid every month... I don't get the reference as me being the primary though... So this means I'll apply for it and just add him as the "co signer"? Or the other way around?

never done this before

Anonymous · ‎10-10-2016

Another thing to consider, after discussing it with your wife, is the possibility of obtaining a much smaller loan just to help him get back on his feet - $2,000 or so, for example.

It might be quite a bit easier for you to pay off a $2,000 loan if he becomes disabled or has an emergency, versus a $7,000 one. Just a thought.

UncleB · ‎10-10-2016

Many good points already brought up here...

I'll just 'second' the suggestion that if you choose to move forward, have your cousin pay you directly then you make the payment. That way, if there's an issue you will know before the damage is done (I've actually lived through this one).

The death/disability note is a good reminder as well. There are many stories out there where parents owe tens of thousands for private school loans when their child has an untimely death (unlike 'regular' loans, private loans aren't discharged on the death of the student). The same goes for co-signing for a personal loan or auto note... if something happens to either person, the other is still responsible for the payment, no matter how unfortunate the details.

Finally, also know that on the credit reports the account will be reported as 'joint'... meaning equal responsibility. Even though the bank/CU might use the terminology 'co-signer' for all practical purposes you're a complete equal.

UncleB · ‎10-10-2016

@Creditplz wrote:
Yeah I think once I talk to my DW and if I do finally go ahead and co-sign I'm going to have Auto-pay on it and make sure it's paid every month... I don't get the reference as me being the primary though... So this means I'll apply for it and just add him as the "co signer"? Or the other way around? never done this before

When I've done this in the past you submit one application with information for both applicants; it has to be done together.

The 'primary' really doesn't make a difference since your both equally responsible, but will determine who's name is listed first on the account. (This is really only important when there are tax implications... the 'primary' is usually responsible for the tax reporting if any.) For a personal loan it shouldn't make any difference at all.

A long time ago I was a "co-signer" on a checking account, and to access it over the phone I had to have the last four digits of the primary's social security number, but that was just a 'quirk' of that particular bank. Other than things such as that (and taxes, when applicable) it usually doesn't matter.