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Show Miscellaneous The Summit County Bee Page B4 Ask A Specialist: I Have Been Asked To Cosign on a Loan. Should I? November 17, 2006 Subscribe 9\[pzv To The Summit County *Bee! 336-5501 ur 0 IV© ree in ANSWER BY: JUDY HARRIS USU Extension Family and Consumer Sdenee Agent. Utah County Office Co-signing is risky business. Even if you have enough money in an account to cover the loan you are asked to co-sign, you must consider the long-term consequences. It is crucial to understand that cosigning is the same as borrowing money. It is an important financial decision and should be made for sound financial reasons. Consider these risks; If you co-sign on a credit card or loan and the borrower defaults, you are obligated to repay the entire balance. Do not co-sign unless you are willing and able to pay the entire debt. In addition, you may also be required to pay lale fees or collection costs. Be aware that in some states, including Utah, the creditor can colled the debl from the co-signer without first trying to collect from the primaiy borrower. Creditors can use the same collection methods against a co-signer as those used against a borrower, such as suing or garnishing wages. If the debt is ever in default, it can become part of a co-signer's credit record for at least seven years. It is possible for a co-signer to put the asset at risk. For instance, if parents co-sign on a teen's car and they later file for bankruptcy, the teen's car will be included with the parent's assets and could be liquidated. If you agree to co-sign a loan or decide to loan money to a relative or friend, it is wise to use a legal contract. A contract to seal a loan and repayment agreement is generally recommended. Ask yourself; if this person should die, would I want his or her estate to repay the loan? If the answer is yes, you should have a legal contract. You can buy contract forms at many office supply stores. For a real estate loan, business loan or other sizable loan, consult an attorney. In addition to the potential financial risks, decide if you are willing to risk the relationship difficulties that will likely arise with the person whose loan you repay. Consider this experience. Recently, a woman was asked by her sister to co-sign on a home loan so she could receive a lower interest rale. (This should have been,a warning. Consumers who do not qualify for lower interest rates have either mismanaged their credit in the past or have not yet established a credit history.) •*•>• **: • •*-»* rl y-- • - rees r*>v n • 'i,-.:1: Because she was not asked to pay anything, the woman co-signed to help her sister, and the contract was written at a lower interest rate. Unfortunately, after a few months, the woman was notified by the lending institution that her sister had not made payments for several months and she. as the co-signer, must now pay. m '•••*&. W i« The two extended families were torn apart by the incident, and the woman is facing devastating financial consequences from co-signing, as well as the loss of her previously excellent credit score. Most of us want to help our family and friends and find it hard to say no, even if we know it is the right answer. Think about it now and prepare before the need arises. A tough love "no" may be the best response for both parties. •^'-r \m /. -X*.' Computer Science jpducational Technology Elementary Education ^English Technical Writing Family and Human Development iJHealth, Physical Education, and Recreatio Psychology-School Counseling Secondary Education Special Education , r.if. E B Jfc '<''• m oiar asters Programs ••*-'• 1 H vt _ E R T Y UNIVER&CTY or more 1 "Kir> mation contac Vicky Roberi *• 801.863.663 hi ,' i >r@ext.usu.ec ffi* • . . |