How to Be a Good Cosigner

August 29th, 2018 by

Staff
Cosigning is a common practice in Canada. If a person is unable to prove their financial security but needs a loan, a cosigner can help them obtain one.

Many lenders advise against cosigning due to the large responsibility, but on occasion, a cosigner is required for a person to obtain a loan.

What is a Cosigner?

A Cosigner is someone with a good credit score who goes on record to say they will take over a loan if the primary signer can no longer pay it.

The Benefits

Being a Cosigner has many benefits to both the person needing the loan and the cosigner. Some of the benefits of being a Cosigner include building your own credit score and getting a higher quality loan.

The Risk

Cosigning a loan means that if the applicant can no longer pay the loan, the loan becomes your responsibility. How your credit will be affected throughout the entirety of the loan is dependent on the applicant paying back the loan.

How to Be a Good Cosigner

Before you agree to cosign, asses your personal risk in the deal. You must be confident you can make the payments for this loan in addition to your own. If the applicant can no longer pay the loan, you are responsible.

1) Assess Personal Risk

Can you afford this loan

2) Build Trust

– Only cosign if you have built a strong enough relationship with the applicant

3) Review the Terms of the Loan – Be sure you fully understand the loan before signing

4) Keep in Contact

– You have the responsibility as the Cosigner to assure the loan is being paid

5) Help When Needed

– If the applicant cannot make a payment, your credit score will be affected. It is better for the Cosigner to make the payment than to take a hit on their credit score.

Get Out of Cosigning

Want to remove yourself as a Cosigner? There are many options to change the contract. Discuss with your loaner and applicant which method works best for all parties.

Have more questions on how to be a good cosigner? Crown Credit Solutions can help!
Call, Email, or swing by Crown Credit Solutions for the best credit advice in Winnipeg.

Posted in How To