No one likes to think about dying, and no one wants to die and leave behind a debt for a loved one to pay.
To drive that point home, a recent study by Securian Financial Group reveals, “only 7 percent of consumers are financially prepared if they or their cosigners pass away unexpectedly.”
But what about if you are living, default on a loan, and leave a cosigner with your debt? That’s not cool either. This is why the experts at Consolidated Credit warn about cosigning altogether.
Always remember, when you co-sign a loan you’re taking on that obligation. If the person dies you are liable for the debt and if they are living and fail to pay the debt, you are responsible, too. It’s just not a smart thing to do unless you have money to burn.
So what can you do to avoid paying off someone’s debt if you cosign?
- The most obvious – don’t cosign
- If it’s a spouse, have life insurance or a will in place for when they pass away
- Seek professional advice
Before you consider cosigning a loan, think about this information provided by the Federal Trade Commission. If you cosign a loan:
- You will be asked to guarantee the debt. If the borrower does not pay the debt, you will have to
- You may have to pay the full amount, which may include late fees or collection costs
- The creditor can collect the debt from you first rather than trying to collect from the borrower, (depending on what state you live in) because your cosigning made the loan possible in the first place
- The creditor can sue you to pay the loan
Think before you sign: It is estimated that 90 percent of private student loans require a cosigner. It doesn’t matter if that student is your son or daughter or a best friend, you will be responsible for the money if you cosign the loan. Don’t let your emotions get the best of you – think before you sign.
If you’re having problems paying off debt and don’t know where to turn, contact Consolidated Credit and have a certified credit counselor help you resolve your issues with debt.