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Why Co-Signing Is Dumb

Well, so far we’ve covered why Credit Cards and Debt are dumb. This time we’re going to discuss why co-signing is dumb. We know that the borrower is slave to the lender. When you borrow something you are enslaved to whom or whatever you borrowed from. So how many of you have co-signed for someone before? Did you do it because you thought you were helping them? And how did that turn out? What it comes right down to is that you aren’t helping anyone by co-signing a loan for them. 

I know, I know. These past few posts aren’t making me very popular, huh? But believe me, I’ve done enough research and studied a lot of case studies and statistics to know why co-signing is dumb. In more cases than not, when you co-sign something for someone else, you will end up paying for it and the relationship between you and the person you’re trying to “help” could be damaged.

Let’s dig into this a little deeper. Why does someone need a co-signer in the first place? It’s because the bank or lender has deemed the other person not worthy of the loan whether it’s because they have no credit or because their credit stinks. The lender has determined, based on a very complicated formula, that the probability of your friend or relative paying back the loan was very low. So, that’s why they “NEED” a co-signer with better credit to be the back-up. In the event the original borrower doesn’t pay (which is very very likely) as the lender predicted, they will go after you. But because you’re trying to “help out” and think you know this person better than the multi-million dollar company does, you feel they will be “The One” who pays it back. 

Really? Are you kidding me? Remember… You’re dealing with a company whose very job is to loan money to people who will pay it back so that the company can make a profit. If someone needs a co-signer, don’t do it! EVER! You are not helping. If you’re trying to help them build their credit, then realize that the only way to have a good FICO score is to go into debt and stay in debt and pay it off perfectly, forever. Remember the borrower is slave to the lender. If you’re trying to help someone get a car, remember that the car is going to go down in value like a rock (I wonder if that’s where Chevy got that saying)! If you’re trying to help someone get a house, consider if you’re actually helping them if they can’t get it on their own. Maybe they need to be patient and do things to help themselves get it on their own. 

I know this is harsh stuff. My wife and I will never co-sign for anyone, ever! I’ve heard and read too many horror stories of how it actually turns out. And hardly is it ever a happy ending like in a fairy tale or the movies. 

“It’s stupid to guarantee someone else’s loan”. (Proverbs 17:18 Contemporary English Version)

Read this article from Dave Ramsey and USAA about the downsides of co-signing. While I don’t agree with everything the USAA article says, it’s still a pretty good list of reasons.

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