Website design By BotEap.comMoney is the best deodorant. ~ Elizabeth Taylor ~

Website design By BotEap.comAs ‘Liz’ points out, money gives off a certain smell, and when people smell it, you can bet your bottom dollar that you will attract certain people. These people only want to borrow a few dollars, and are even willing to pay it back … with interest … so where’s the problem?

Website design By BotEap.comUnless you are ready to cancel it, under no circumstances do you loan money to family and friends. That especially means the joint signing of loans. Period. This is why. You cannot win. You cannot get ahead. You have everything to lose and nothing to gain.

Website design By BotEap.comIf you get your money back, you simply avoided a potential catastrophe. If you don’t get your money back (which may be the case), your relationship will never be the same again. It usually results in irreparable damage.

Website design By BotEap.com“Oh, I don’t want you to give me money, I just want you to sign as a co-signer on a loan!”

Website design By BotEap.comThat is even worse!

Website design By BotEap.comBanks and financial institutions are professional lenders. That’s what they do. In the same way that Major League Baseball players are the best in the world at playing baseball, bankers and moneylenders are the best in the world at lending money and assessing risk. If a friend or relative asks you to sign a loan, it can only mean one thing: the banker or lender doesn’t like the odds of getting your money back. In fact, they think their chances are so slim that they are saying outright “No!”

Website design By BotEap.comSo is that a good reason for you to step in? You are not stupid. You know very well that your family member or friend represents a negative credit risk, and yet we often reluctantly agree to sign. Why?

Website design By BotEap.comYour left hemisphere, logical brain, knows this is a bad move. His right hemisphere, emotional brain says “Oh he’s a nice guy, things will work out in the end.” Parents sign for their child to buy a car or house to learn responsibility. Hmm. Responsibility can best be learned the way you learned it. Save and manage your money and voila, you will have enough to buy what you need on your own.

Website design By BotEap.comYou should be aware that joint signing can go much deeper than simply agreeing to cover the loan.

Website design By BotEap.comNot long ago, a friend of mine (they told me he’s a former friend now) called me and asked me to jointly sign a new mortgage on the house that he and his girlfriend lived in. This is the scene.

Website design By BotEap.comOver the past year, my friend and his girlfriend had missed several mortgage payments. The bank was tired of chasing their money, so they called the loan. My friend quickly searched and found a lender who was willing to take the mortgage and give my friend access to ninety percent of his remaining principal, provided he could find a co-debtor.

Website design By BotEap.comThen my “friend” called me to tell me the good news. He had found a new mortgagee and all he needed was for me to agree to co-sign his girlfriend’s mortgage. (If you’re wondering why my friend’s name wasn’t on the mortgage, it’s because he filed for bankruptcy several years earlier and was forced to put the house in his girlfriend’s name.) It gets better.

Website design By BotEap.comMy friend further explained that it was a “really good deal” because the new mortgagee required a much lower monthly payment than the current one. In fact, with this smaller monthly payment and up to ninety percent of the remaining capital available, they could use the principal to pay their monthly bills. As he explained, it was as safe as a house. How is it possible that they miss a payment? “Think about it,” he enthused, “it’s a complete no-brainer.”

Website design By BotEap.comTo take a closer look at how delusional some people can get, my friend hasn’t had a job in six years, and by all accounts at the time he called, he had no intention of getting one.

Website design By BotEap.comTo be fair, I don’t think my friend really had any idea what he was asking me to do. He “really believed” that I would suffer no more inconvenience than having to go through the hassle of scribbling my name on a piece of paper. Actually, by being a co-signer on that loan, it would have brought a mountain of responsibility and aggravation to my head.

Website design By BotEap.comAs a co-signer, you declare that you will take full responsibility for the entire matter. Indeed, even if everything goes according to plan (and it rarely will), the joint signing can have a devastating effect on your own finances.

Website design By BotEap.comAs a co-signer, the liability immediately shifts to your credit history. In fact, this could prevent you from obtaining a loan, or your own mortgage, because a creditor considers the co-signed loan as one of their obligations, and make no mistake about it, it is!

Website design By BotEap.comIf you are a co-signer and your friend does not make a payment, the lender can collect from you immediately without first looking for the borrower. Also, the amount you owe can be increased by late fees and attorney fees if the lender decides to sue for payment. If the lender sues and wins, and generally will, your wages and property can be taken as payment.

Website design By BotEap.comIf, for example, you are signing as a co-signer on a car, the lender will not contact you when the loan is in arrears, and when it is, it is your credit that is damaged. The lender won’t bother to contact you when you’ve grown tired of chasing your delinquent friend and decide to get the car back. You will be greeted with a predetermined notice and will have a “repository” on your credit report. The “good notice” in the mail will inform you that you are a bum who owes money on a car you never drove. The lender will make a quick sale, usually well below cost, and will come after you for the difference, including legal fees!

Website design By BotEap.comIf the lender contacts you before you repossess the car, there is nothing you can legally do to force a sale because you do not own the car; the only thing you have is responsibility. Co-signing for a house is the exact same game but on a potentially much larger scale.

Website design By BotEap.comYou’re probably wondering what I said to my friend. Did I seize the obvious opportunity? No, not quite. I told my friend that I did not feel comfortable signing his girlfriend’s mortgage and that I would have to look elsewhere. His answer … he hung up. I have been told through the vine that he will never speak to me again.

Website design By BotEap.comI have to admit that I gave it a bit more thought, but finally came to the conclusion that I just don’t need or want “friends” like that. After all, what was he saying? In fact, I was saying that in order for our “friendship” to continue, I was not allowed to make my own decisions regarding my money and my future. Any other person, bank, lending institution or other acquaintance can make a prudent business decision and reject your “offer”, but I, as a “friend”, do not have the same right. They gave me an ultimatum: either I jointly signed the loan and accepted the consequences or, in their opinion, we are no longer friends.

Website design By BotEap.comThe more I thought about my decision, the better I felt about it. I concluded that if he had the “gall” to ask for such an outrageous favor, he would have no problem having the gall to refuse. And neither should you. If that’s the price or condition of friendship, you may want to reevaluate your relationship.

Website design By BotEap.comAt some point in your life, you will likely be asked to loan or co-sign someone. This is my advice. If you can afford it and want to, just give them the money. No loan, no written agreement, no worries about getting your money back. This method will keep your relationship intact.

Website design By BotEap.comIf you cannot afford to give the money, respectfully decline it. If you go against this advice and loan the money, be fully prepared to pay it off. There’s the old line; “I delayed my brother-in-law a thousand dollars and never saw him again. The best thousand dollars I have ever spent!”

Website design By BotEap.comIf you really want to help someone, just give them the money. If you don’t have it, don’t sign up to pay because you most likely will.

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