Family member asking for co-signer(rant)

[Northwestie]

Agreed - don't step off the plank

[K-Dogg]

My unemployed uncle recently asked me to be his guarantor for his cell phone. I quickly shut that down. No way will I co-sign anything for anybody. I'm working hard to get all my financials in a row and that includes not taking on unnecessary risk for others.

[Kaspian]

I'll just drop this article here.  About a million reasons why it's a bad idea.

http://livingstingy.blogspot.ca/2009/04/never-co-sign-loan.html

[chaskavitch]

I still feel a little bit bad for not co-signing for a car loan for my sister a few years ago.  It was right after I'd gotten engaged and DH and I were looking for houses.  My sister is generally mostly responsible, but her credit was shot because she'd forgotten to transfer automatic payments for a Kirby vacuum and a laptop from one bank account to another when she switched banks, and a few missed payments are all it takes.  So, she wasn't someone I was worried about totally punking out on payments and leaving them to me, just someone forgetful enough with things that need timely attention that I didn't quite trust her future self to follow through quickly enough if something came up.

I ended up loaning her the difference between her savings and the cost of the car, with the stipulation that it was technically savings toward my wedding and I'd really like it back in a timely manner.  She gave me a check for the full amount a few months later in a card at my bridal shower.  And she still has the car, so that's good too :)

[Metric Mouse]

My unemployed uncle recently asked me to be his guarantor for his cell phone. I quickly shut that down. No way will I co-sign anything for anybody. I'm working hard to get all my financials in a row and that includes not taking on unnecessary risk for others.

He needs a loan for a cell phone?

[Adventine]

Oh, no--hell, fuckity no on co-signing.  You haven't been responsible thus far but I trust you will with me?  I've printed this out and handed it to people before.  I'm not enabling somebody elses' borrowing.  Tough love, baby.  I'm thinking of having it laminated.

http://lenpenzo.com/blog/id15845-dear-friend-here-are-41-reasons-why-im-not-lending-you-the-money.html

Saving this for future reference!

[LouLou]

I still feel a little bit bad for not co-signing for a car loan for my sister a few years ago.  It was right after I'd gotten engaged and DH and I were looking for houses.  My sister is generally mostly responsible, but her credit was shot because she'd forgotten to transfer automatic payments for a Kirby vacuum and a laptop from one bank account to another when she switched banks, and a few missed payments are all it takes.  So, she wasn't someone I was worried about totally punking out on payments and leaving them to me, just someone forgetful enough with things that need timely attention that I didn't quite trust her future self to follow through quickly enough if something came up.

I ended up loaning her the difference between her savings and the cost of the car, with the stipulation that it was technically savings toward my wedding and I'd really like it back in a timely manner.  She gave me a check for the full amount a few months later in a card at my bridal shower.  And she still has the car, so that's good too :)

Giving her a loan was a much better solution that co-signing.

[chaskavitch]

I still feel a little bit bad for not co-signing for a car loan for my sister a few years ago.  It was right after I'd gotten engaged and DH and I were looking for houses.  My sister is generally mostly responsible, but her credit was shot because she'd forgotten to transfer automatic payments for a Kirby vacuum and a laptop from one bank account to another when she switched banks, and a few missed payments are all it takes.  So, she wasn't someone I was worried about totally punking out on payments and leaving them to me, just someone forgetful enough with things that need timely attention that I didn't quite trust her future self to follow through quickly enough if something came up.

I ended up loaning her the difference between her savings and the cost of the car, with the stipulation that it was technically savings toward my wedding and I'd really like it back in a timely manner.  She gave me a check for the full amount a few months later in a card at my bridal shower.  And she still has the car, so that's good too :)

Giving her a loan was a much better solution that co-signing.

I absolutely agree.  I think she just didn't realize until that moment how bad her credit situation was, that they wouldn't give her a $5000 car loan at a credit union she'd been a member of since she was like 5.  She was just so sad that it makes me feel bad in retrospect, even though I made the smarter decision and she got the car anyway.  Also, she has since gotten a secured credit card, worked her way up like 100 points on the credit scale by being diligent in her use and payments on the card, started a Roth IRA, and has a small emergency fund.  She's figuring it out little by little and it makes me glad :)

Edited to fix my terrible quote sandwich.

[ooeei]

It's okay to feel a little shitty because they usually have very good intentions, and fully think they're going to pay it back.  They really think that it's all going to work out and is just a slight inconvenience for you, and that's why you feel shitty.

The problem is, all of the data says that they can't/won't pay it back.  Intentions are great, but in 3 years when they've lost their job or had a health problem, those original good intentions don't mean much to the bank.  You're protecting both them and yourself from a terrible financial situation by refusing them.

[ariapluscat]

Wow! These comments really changed my perspective on who asks for a guarantor/co sign. I've encountered it as a student, renting, and in any but the building I chose, I would have needed one for an apartment as a self employed person (this one just went by credit score and proof of 3 months income).

And yeah, if a close relative turned me down on that after being allowed access to my finances, I'd be hurt.

But you can't ask someone to do you that favor without offering access to your records, and I also wouldn't put a guarantor on a lease unless there is a clause to let me remove them after a good record.

Sometimes people's money habits confuse me.

I was in the same boat. When I started this forum, I was only thinking of my experience having a foster parent sign a guarantor on a lease while in college.

Now I'm aghast how poorly people are treating family who are trying to be supportive and know I need to send my own lease co-signer a really nice thank you.

[JumpInTheFIRE]

As many have said, co-signing is always a bad idea.  I will occasionally loan money to family or friends but only after evaluating their credit-worthiness.  As mentioned above, what do you know that the bank doesn't know?  You should evaluate the loan on its merits and try to not let emotion come into the decision, and you should never loan more money that you can comfortably lose.

For example, my brother and SIL were trying to have a baby and banks generally won't loan money for IVF (because it's hard to repossess a child and it doesn't always work).  They ended up getting a "fertility loan" at an awful rate.  When I heard about this I offered to loan them the money to pay off the high-rate loan so they wouldn't get so screwed on the interest.  Several factors went into my decision to make the loan:

- Overall they have decent credit with no loan defaults
- My brother and I own a house together, so I already rely on him to make timely payments on something that will screw my credit if he doesn't and he has never let me down.
- His monetary temperament is similar to mine.  We both were raised to be very frugal and don't spend money on needless things.

Even though I was pretty sure he would make payments on time, I wrote up a loan agreement that specified the payments and payback schedule.  It helps both the lender and borrower when the terms are clearly defined.  If you make a loan that is "pay me back when you can", don't expect to ever see that money again.  So far my trust had been justified, he has been making regular payments for 18 months without issue and my new nephew is a source of joy in my life so I'm happy I was able to help them out.

It's nice to be in a position to help out family and friends financially but I got into this position by being responsible with my money and I refuse to help people who are in the position they are in because of their irresponsibility.  Evaluate any requests like this on its own merits and again, never co-sign.

[AZDude]

Just an update for anyone interested.

I asked for more information, cash flow, budget, equity situation on the home, etc...

I was told "don't worry about it, I will figure it out".

Problem solved on my end. This person was clearly not ready to take the first step toward mustachianism.

[Metric Mouse]

For example, my brother and SIL were trying to have a baby and banks generally won't loan money for IVF (because it's hard to repossess a child and it doesn't always work). 

It took me several re-readings to work around "How hard do you have to work a child to pay off their own conception?"  It may not have been what you meant.

[NoraLenderbee]

For example, my brother and SIL were trying to have a baby and banks generally won't loan money for IVF (because it's hard to repossess a child and it doesn't always work). 

It took me several re-readings to work around "How hard do you have to work a child to pay off their own conception?"  It may not have been what you meant.

LOL. I read it as "reposessing a child doesn't always work." But sometimes it does!

[prognastat]

I was told "don't worry about it, I will figure it out".

Was this as a way of them assuring you it was ok for you to co-sign, a bad sign, or them saying never mind?

[AZDude]

I took it as "never mind".

[prognastat]

If they weren't willing to provide any information to prove they were going to be able to handle paying the loan then I doubt they are in a good position for the loan.

[humbleMouse]

I wish my mom had never co-signed my student loans.  I was a dumbass 18 year old who had no idea what I was getting myself into.  I didn't even ask or anything, she just wanted me to go to college.  Wish I would have stayed away from college - nothing but trouble resulted from going. 

[MrsPete]

When I was much younger, my grandmother co-signed for me to buy a car.  She explained a few things to me in some very clear terms:  She said she'd only do this for me once.  If I handled the loan well, I'd never need help again.  If I didn't handle it well, she herself would repossess the car, and she'd not help me again financially.  I was very, very grateful for her help and did not let her down. 

I'll do the same thing for each of my children:  I'll help ONCE, and I'll give them the same lecture. 
I won't do it for anyone else.