Are there any negative effects of being a co-signers on a debt consolidation loan?

Question

Are there any negative effects of being a co-signers on a debt consolidation loan?

Answer

If someone has asked you to co-sign a debt consolidation loan, you must be very, very careful. The first thing you need to understand is the co-signers debt consolidation obligations. You need to consider those obligations carefully, as well as the relationship you have with the person who is asking you to co-sign, so you can make an informed choice.

A debt consolidation loan is a loan that a person takes to take a whole bunch of debt and turn it into one debt. Usually, people take debt consolidation loans when they:

  • Have a lot of debt
  • Have debt they can't make payments on
  • Have debt at unfavorable terms, such as high interest rates

When you co-sign a debt consolidation loan, you become equally responsible for the debt if the primary borrower doesn't pay. In other words, if the person who you co-signed for misses a payment, that shows up on your credit as a missed payment for that particular account. If the person stops making payments altogether, the creditor who issued the debt consolidation loan can come after you. This can be a disaster, leaving you with ruined credit and paying bills for debt you didn't incur. As such, you need to think very, very carefully about whether co-signing is worth the risk.

If you are considering co-signing or already have co-signed a debt consolidation loan, you may wish to speak to an experienced lawyer who specializes in debt consolidation. Your attorney can explain to you what your rights and obligations are regarding the loan and what, if anything, you can do to limit your risk.

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