Canton Co-operative Bank President & CEO Nick Maffeo writes a popular monthly column on finances for the Canton Citizen. (His columns can be found on the Citizen web site and also here on Canton Co-operative’s web site).
He recently wrote in detail about the pros and cons of co-signing a loan for a family member or friend.
The bottom line: Co-signing is a complicated financial decision that should never be made quickly or casually.
When someone asks you to co-sign a loan, they are asking you to make their loan payments if they can’t or won’t.
Since primary borrowers who can’t secure a loan on their own tend to have a high probability of defaulting, the chances are very good if you co-sign that you will have to start making those payments. If that sounds alarming, you should probably refuse to co-sign.
Many people who co-sign don’t realize – until it’s much too late – that they aren’t automatically the co-owner of whatever it was they co-signed for. Which means they can’t force the primary borrower to sell the asset and pay off the loan. The co-signer just has to keep paying.
Co-signing is serious financial commitment. There can be severe consequences for your finances and your credit history if you co-sign and things go wrong. If that’s a chance you don’t want to take – a problem you don’t want to have – remember that it’s always 100% okay to refuse to co-sign a loan. Anyone who truly cares about you will accept your decision.
If you have been asked to co-sign a loan and you’re considering it, it will be well worth your time to consult with your banker, a CPA and/or an attorney first. You want to be 100% informed of what you’re getting yourself into.
Canton Co-operative – a bank customers like, a bank you can trust – since 1891.
Canton Co-operative Bank is located in downtown Canton at 671 Washington Street, Canton, MA 02021.
The main phone number is 781-828-8811.
NMLS #721437