Wisdom Wednesday: Co-Signing

Photo credit: Dave DiBiase - www.sxc.hu/photo/204756

Photo credit: Dave DiBiase – http://www.sxc.hu/photo/204756

Have you ever co-signed a loan or credit card application and later came to regret it? There is a reason the Bible and financial advisers tell us not to do it.

What about co-signing for a son or daughter? No, not even for your child. If your son or daughter needs to establish credit in order to obtain a college or car loan, there are alternatives, but they need to plan ahead. Years ago, my daughter obtained a small secured loan in the form of a credit card by using part of what was in her savings account as collateral. After a year of using the credit card and making timely payments, the collateral money was released, and her credit was established. Not only does a secured loan help your child establish credit, but it teaches them personal responsibility and gives them a greater sense of independence.

“Be not thou of them that strike hands, of them that are sureties for debts. If thou hast nothing to pay, why should he take away thy bed from under thee?” —Proverbs 22:26, 27

“He who is surety for another, pays for him.” —Dutch proverb

“When you run in debt, you give another power over your liberty.” —Benjamin Franklin

Proverbs 17:18 says it is foolish to guarantee another person’s loan or put up security for a friend. But what if you already have? Proverbs 6:1-5 says if you already have, you should beg them to release you from the pledge. If you have signed a contract, it’s probably a little too late to get out of it, unless they can find another way of securing the loan. But if they will not or cannot release you and find themselves unable to make all the payments, it would be best, not only to accept responsibility for what they cannot do, but also to forgive them and consider it a gift. Otherwise you will both remain under bondage and have a strained relationship.

Most people don’t realize when we co-sign for a loan, we add it to our debt liability, which can affect our credit score. Not only that, if the borrower makes late payments or defaults on the loan, we are primarily responsible, and that, too, affects our credit score. Co-signing involves a lot of risk with little benefit, so the bottom line is don’t do it.

Disclaimer: The information contained in this article is for educational purposes only and should not be used as professional financial advice. Any reader who is concerned about going into debt or getting out of debt should consult a professional financial adviser.

About Rene Yoshi

Just a transplanted Okinawan-French Southern girl with a wee bit o' Irish, sharing photography and what I'm learning about spiritual things, including putting off legalism and religious traditions, and embracing God's matchless love, tender mercy, and amazing grace! View all posts by Rene Yoshi

15 responses to “Wisdom Wednesday: Co-Signing

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