Don't cosign for debt or you'll be liable for it
Dear BLR Editor,
My 23-year nephew, who I’m quite close to has just graduated from college and doesn’t have much of a credit history. He would like to buy a new car for work but needs a cosigner. He has asked me as his parents refuse to sign it. They would prefer him to buy a cheaper used car, which they would help out with.
The new car’s cost is about $21,000, by the way.
- Susan
Editor – Thanks for your question, Susan. I appreciate your care fror your nephew, but I’m going to try to dissuade you from cosigning the car note.
What most people don’t realize is that cosigners are equally liable for the debt incurred.
If the borrower defaults, the lenders usually go after the deeper pocketed cosigner equally hard, or even harder. If he skipped town (or even if he stayed), you would be liable for the entire balance of the loan.
For a kid out of college, I would be inclined to agree with his parents and urge him to buy a nice used car, certified if possible and checked out fully with CarFax. He can impress his friends later when he can afford it.
If you don’t have the money to pay off the car loan with a smile, don’t do it as it could lead to years of debt for you. If you can, offer him a small financial gift or loan towards a cheaper used car.
I wish your nephew the best in his new career.
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