What is meant by co-signing?
A co-signer is a person who agrees to pay the debt of a borrower if he/she fails
to pay the loan and this process is known as co-signing. A co-signer generally
have huge amount of credits which increase the loan approval chances of a
borrower. Co-signers play a huge role in this world as many people will find it
difficult to get their loan approved without the help of co-signers.
People generally co-sign a loan to assist the family members, siblings, friends
and others. However, helping the family member by co-signing for a loan can
feel rewarding but it come with its own drawbacks. Let us look at some of the
things to consider before co-signing a loan.
”Why would someone ask me to co-sign a loan?”
It is very important to think about the question- why would someone ask me
to co-sign a loan? There might be possibility that the person has a very bad
record of past loan credit, missed EMI etc. However, there can also be a case
where a person like you own children, who are new to credit or who haven’t
taken a loan before may need you to co-sign a loan.
“How does co-signing a loan affect your credit score?”
Co-signing a loan is a very important step and it must be done cautiously. You
have co-signed for the loan means that you have good credit score. When the
borrower fails to pay the loan, you will have to pay the loan. If you also fail to
pay the loan or miss the EMI, then it will impact negatively on your credit
score. On the credit score, it will add to your debt. More debt means that it will
reduce your credit score and you may face a problem while taking another
loan.
However if you pay the loan and pay the instalments timely, it will improve
your credit score. It will help you in taking loans in future. You can always
check the credit score online.
“What are the disadvantages of co-signing a loan?”
Here are the following disadvantages of co-signing a loan
If the borrower fails to pay the loan, you will have to pay the remaining
loan
If the borrower defaults the loan, your credit score will decrease
In case of default, if a loan donor like bank file a suit for the loan, they
are likely to sue the co-signer due to their high credit score
Co-signer cannot take the name off the loan agreement once the loan is
approved
If the borrower delays the instalments, it will decrease your credits
“How to be safe while co-signing a loan?”
You can never feel safe while co-signing a loan, there is always a danger lying
around. However, you can take following precautions to reduce risks
Always co-sign for a person who you know better. Ensure that they are
capable of paying the loan by themselves.
Be prepared for paying the loan if the borrower defaults the loan
Ensure that you have all the copies of everything related to the loan
agreement.
Contact BIATConsultant.com to have a consigning loan services in India.