In the last month, I received two e mails on the (sort of) same subject from two different sides that are worth sharing. I’ll start with the negative one, for a very good reason.
“Because of your stupid book, my parents won’t cosign for a car loan for me now. Thanks a lot. What am I supposed to do now?”
Dear anonymous: Hurray for your parents. I am very proud of them. Borrowing money is not a solution in life and teaching you that your immediate needs can just be solved with borrowed money will set you up for a lifetime of financial failure. No, you won’t understand that now, but you will in a decade or so.
Once you calm down and get out of your judgments, grab the It’s Your Money book. It’ll be more education than you’ll get in most of your classes – honest.
But if I don’t, my kid will have to wait at the bus, or get a ride. Good news: They can spend that time studying. Yes, I’ve heard all those arguments. News flash: You’re good at time management, your kid isn’t, and won’t study more, or get better marks, when you cosign a car loan. Inconveniencing your kid does not constitute child abuse. Stop kidding yourself.
The second e mail was from a grandfather: “Our bank just called to let us know that they took $2,300 out of our savings account to pay off for my grandson’s car loan….”
What happened here is that the gentleman cosigned for his grandson’s car loan. The kid was almost 90 days in arrears and the financial institution took the balance from the cosigners account. Yes, they can. When you cosign, you are just as legally liable as if you borrowed the money.
News flash: 100% of people asking you to cosign will assure you they will never ever go in arrears and they can totally afford it. I’ve never heard the opposite and 99% of people don’t think of the consequences when things go wrong – as they will – as they did here.
What’s even worse is that this gentleman’s credit is now trashed. The 90 day in arrears is on his credit file and will stay there for seven years.
If you’re going to ignore my plea to never ever cosign for anyone under any circumstances, at least assure that the loan documents have your address on them. It’ll assure that any notices and statements come to you, so that you’re proactively aware of what’s going on with the loan.
In the It’s Your Money book are a whole list of alternatives to cosigning. Read them and find one of them, instead of ruining your credit, your relationship, and your finances.