I have done it. I moved my lovely daughter from her college town (she graduated in May) to her new digs: an apartment in a city that is much larger than any I ever lived in. If I were moving there, I would be intimidated. I didn’t realize that the country was so big, let alone a city.
But not my kids (my son is there, also). If we raised them correctly, they would be eager for new challenges. The smallness of the places they grew up, while comfortable, are too restrictive for their ever-expanding thirst for new experiences. They are very eager to move forward, so it appears we didn’t screw up the child-raising, at least in this respect.
There is still money owed on the student loans and even more on the money we borrowed to keep from my daughter being bogged down with enormous debt. My wife and I are still paying dearly for that privilege, but we are glad to do it.
Our clients are not always so lucky. They often borrow money for and with their kids, hoping for the best. Sometimes the kids respond well and take their responsibility to heart. Translation: they make the payments. But many of the parents we see are those whose kids have either not had the ability to pay, or have essentially abandoned their responsibilities to pay with apparently no regrets, according to our clients.
So what now? Co-signing means that you have taken on full responsibility for whatever loan you or the kids have taken out. Not half; full responsibility. And the creditor has no obligation to get the money from your kids first. Translation: the creditor will try to get the money from the person whom they believe has the ability to pay. And that is more often the older of the signers on the dotted line, often a parent or a grandparent.
Legally, then, you should consider your obligation to pay on a co-signed debt the same as if you are borrowing the money for your own use. And before you place your signature on the papers, you must consider what will happen if your son or daughter stops paying. Do you have the ability to take over the payments? If not, don’t sign!
You also have to consider the effect on your credit: if you value your credit, and your son or daughter doesn’t make the payments on time, your credit will most likely be negatively affected, just the same as if you made the payments late on your own loans.
And finally, consider your assets. If you have a house or car or other assets, then a creditor who is coming after payment could get a judgment that might put them in jeopardy, and I don’t mean the game show.
When you are tempted to co-sign a loan for a child, grandchild, friend, or anyone, for that matter, pull out this blog post and read it. Answer the questions I posed in the paragraphs above. Then make your decision.
If you make the correct decision, I may not have to see you as a client!