Atlanta Bankruptcy Attorneys Warn That Becoming a Loan Cosigner Isn’t Worth the Cost
With money tighter than ever this season, folks are looking for ways to cut back without cutting out Christmas gifts.
On the positive side, sticking to a budget is encouraging us to be less materialistic and more creative, giving homemade and small but thoughtful gifts (not to mention it's a lot easier on our wallet that the standard Christmas shopping spree). But some seemingly "free" presents can actually cost us more money than a store-bought gift - and, in the worst-case scenario, can leave us deep in debt.
Co-signing loans can seem especially appealing during tough economic times. Our friends and family need help buying cars and homes, and we're looking for affordable ways to show them we care. Let's say your cousin is in the market for a new car, but she's having trouble getting the loan. You figure you'll offer to put your name on her car loan in lieu of a physical Christmas gift. It's a win-win, right?
Not necessarily and here's why.
Your cousin might have the best of intentions, but she can't predict the future. What if she loses her job? What if she gets behind on her rent or mortgage and has to choose between keeping a roof over her head or the car? What if she gets sick and rings up some hefty medical bills? If anything happens that leads to her defaulting on the loan, there goes your credit score - and probably your good relationship.
Even if she does make the payments on time, you can still get burned. If you need to take out a loan for any reason, your bank could turn you down because they decide you already have too much debt for your income level - even if you aren't the one footing the bill on that car loan.
It's understandable that you want to help out friends and family - but you shouldn't have to do it at the expense of your own financial standing. If they care about you, they'll respect your decision. And if you ever do find yourself drowning in debt - whether it belongs to you or someone else - don't hesitate to get help. Bankruptcy is a time-tested way to reduce debt and free up your finances - it also happens to be your right as a U.S. citizen. To learn more about how bankruptcy was created to help consumers win back their financial freedom, just sign up for a free one-on-one debt analysis with one of our Atlanta bankruptcy attorneys. Consider it a (free) gift to yourself.