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  • Co-signers: Know your Options

    If you have ever come across request to be a co-signer it is highly advisable that before you sign, you must know the roles and responsibilities of a co-signer in the event of securing a loan. Being a co-signer it will be your responsibility to make the missed payments or make the payments when the person who has taken the loan decides to stop payments or else your credit score will suffer. This is the reason that majority of the financial advisors strictly warn their clients as well as ask them to reconsider their decision when it comes to co-signing any loan.

    So, if there is any loan default the co-signers can explore these options.

    Securing Forbearance: Requesting forbearance is a great way for the co-signer as well as the actual person who has secured the loan to get some time because they can’t make any payments due to lack of money. A successful forbearance can suspend loan payments for few months. However, such a step is highly advisable for a situation when the other person in the loan can’t make payments for a temporary period but has complete intention to pay the amount eventually and simultaneously you also don’t have any money to pay for the same.

    Refinancing the loan: One option for refinancing loan involves trying to refinance the cosigned loan with other borrower. This can contribute in reducing the monthly payment that might make the amount affordable for both the other person as well as you allowing both to make payments on time. But in case if the other borrower is still incapable to make these reduced payments then as a cosigner you might find yourself in a position for more interest payments and unfortunately end up paying more money than you could have before opting for refinancing.

    Filing for bankruptcy: As a co-signer if you are facing credit-card debt or other debt and finding yourself in a position not to pay back the amount you owe considering the option of bankruptcy seriously would be a great option. Though viewed with a negative perspective, bankruptcy provides you with an option to start fresh free from debt. Moreover, the court also views bankruptcy as a responsible approach that you would be careful about all the loans in your future.

    However, it is important to remember that bankruptcy will not discharge all your debt like student loan debt, but it might free funds to pay off rest of your debts.

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