Because of the lack of a credit history, employment history or age young adults are often required by lenders to have a co-signer to obtain credit and financing. While serving as a co-signing may go a long way in helping your young adult child get on their feet, it is imperative to understand your legal rights and responsibilities before you sign on the dotted line.  Here are some issues to consider;  

Equal responsibility:
As a cosigner you are equally responsible for the payment of the debt. This means that if the primary borrower fails to uphold the contract, you will be responsible for the payment. In short, if they don't pay you will.  

Default may be unknown:
Because lenders do not send out duplicate statement to both primary borrower and co-borrower, it is not uncommon for co-signers to be unaware that a payments are not being made until the loan is in serious default.  

Credit rating may be affected:
In the event of default, even in cases where the co-borrower is unaware of the default, their credit rating can and will be negativity impacted. As is always, be vigilant in protecting your credit rating.  

Ability to obtain additional personal credit may be hindered: Lenders base credit decisions on many factors, among those factors is income / debt ratio. This compares  the available income to pay debt with the amount of debt owed. When calculating this ratio, the amount of the co-borrowed debt will be considered and raise the ratio perhaps to an unacceptable level.  

Laurie Giles,
Attorney/ Life Coach/ Author/ Radio Host
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