If you are considering co-signing for a loan, credit card or line of credit with another person, it is imperative to research your responsibilities. If you co-sign, the lender will consider you to be a joint borrower, and you become equally responsible for repaying any balances owing on the loan. If the primary borrower is unable to pay the debt, the bank or lender can demand that any borrower and or co-signer listed on the loan or credit agreement pay the entire amount. Also, keep in mind, for certain credit cards, the terms may state that authorized users such as, for example, secondary cardholders can be held responsible for any outstanding balances, even if they did not sign the credit card application. Be sure to read the credit agreement carefully and make sure that you fully understand who is responsible. If you aren’t sure, ask.
If you decide to co-sign for a loan, credit card or line of credit from a federally regulated financial institution, you also have the right to receive the same information about the loan from the lender. For example, if you co-sign for a credit card with another person, the lender must give each of you copies of the credit agreement and the monthly statements, unless you consent to waive this right. This, in turn, allows you to keep track of the status of the loan—whether the other borrower is making payments or if the terms and conditions have changed. In order to guarantee you protect yourself as a co-signer, ask the primary borrower to purchase insurance to pay back the debt in the unfortunate circumstance they pass away. In this circumstance, the primary borrower can name you as the beneficiary on a life insurance policy for an amount that will allow you to pay back the loan. In sum, understand your rights and responsibilities before you co-sign and be certain you read the loan agreement carefully to protect yourself from financial disaster.
Contact Rumanek & Company Ltd. for more information on bankruptcy and debt solutions. Or please fill out the free bankruptcy evaluation form. To learn more please visit our YouTube Channel. Rumanek & Company have been helping individuals and families overcome debt for more than 25 years.