Thursday, May 26, 2011

Co-signing a Loan

Be prepared now because you will most likely face this scenario at least once in your life.

A parent, one of your kids or grandkids, a co-worker, a good friend or ward member will need a car or a house or something else that inspires them to apply for a loan and they will not have enough credit history (or GOOD credit history) to be approved for the loan. This endeared person will come to you and ask if you will co-sign for them on the loan. When they do, you are to scream, yank at your hair, and run as fast as you can past them.
OK, the hair-yanking is optional, but the rest of the instructions still apply.
Never, ever co-sign for anyone. If someone needs a co-signer on a loan, it is because the bank, using its calculations and statisticians, does not believe the primary debt signer is ABLE to pay the loan. In this case, to be "sure" that the bank will get its money back, they ask for a co-signer, or "surety".

Surety is a person who is legally responsible for the debt, default, or delinquency of another. We know it by its modern-day name, a co-signer.

What do the scriptures have to say about surety, or co-signing?
Proverbs 11:15
He that is surety for a stranger shall smart for it: and he that hateth suretiship is sure.

Here we learn two things:
1) Co-signing for a stranger will hurt you.
2) Hating debt or refusing to co-sign (or cover someone else's debt) is a smart thing to do.

"Hey, Adhis- but that's talking about strangers. I would never do THAT! I was thinking of my grandson who wants to buy a truck. And my sister who is just starting out and wants to buy a townhome."

Let's keep reading in Proverbs.
Proverbs 17:18
A man void of understanding striketh hands, and becometh surety in the presence of his friend.

Here we learn two more things:
[1]Someone who is ignorant (void of understanding) enters a contract (striketh hands, like shaking on a deal) [2] to become a co-signer for a friend.

In the future, I will talk more about cosigning, but for now, the most important thing to know is:

Do not ever co-sign on a loan!

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