What is the Application Process When You Co-Sign for Someone?
Co-signers go through the same application process as the primary borrower does. Your income is verified, you must consent to a credit check, you need to disclose your assets and liabilities, and debt servicing ratios must be adhered to. It is as if you are taking on a new loan or credit account because if the primary borrower defaults on their payments, you must step in and make them yourself.
How Much Debt is Too Much?
Can Co-Signing Affect My Credit Rating?
Co-signing or becoming joint with someone can either help or hurt your own credit rating and credit score because the debts are treated as if they are 100% your responsibility. Whether you think of the debt as “yours” or not, in the eyes of the lender it is.
Payment information about any kind of joint debts is reported to the credit bureaus each month for all borrowers. If you aren’t sure that your partner, son/daughter, friend, or loved one is making payments on time and in full, you may want to take over doing that. For example, you could ask them to e-transfer you their payment or give you the cash. That way you can make the payment to the lender yourself and aren’t left wondering if it was made or not.
How to Pay Off and Make Joint Debts Work
Will Co-Signing Allow Me to Control Someone’s Spending?
Co-signing for someone does not automatically give you control about the choices they make with their money. This can be frustrating, especially if you see them spending on what you think are less-essential expenses and then they have trouble making their payments.
If your friend or family member’s spending could be of concern to you, it might be better to find a different way to help them with their finances. You could help them establish and live by a household budget. If they’re dealing with debt, you could help them consider viable options to get it paid down and repair their credit rating. Simply obtaining a new loan or credit card or receiving a gift of cash will not instantly change their money habits and credit behaviour. Be cautious when entering into a joint or co-signed debt agreement; it is not a decision to make lightly.
How to Deal With and Avoid Joint Debt Problems