In this episode of Money Chat Today, Larry Steinhouse and Rick Lee are discussing co-signing loans for friends and family.
Rick and Larry discuss the pitfalls of co-signing a loan after Larry asks Rick to co-sign a car loan. Rick tells the story about how he lost $30,000 when he co-signed a loan for a friend. The reasons this happens and how to avoid them are also discussed. Larry adds advice on how to co-sign a loan for your children and avoid problems.
This is a powerful episode that could save a friendship or any other relationship.
Some important highlights of this video:
- If you Co-sign a loan, YOU are financially responsible for the entire loan.
- You do not get a bill; your friend does.
- You do not know if the loan is delinquent until you get a letter or phone call from the bank saying so
- IF your friend isn’t credit worthy to a bank, that should be a signal to you
- Your credit score may go down even if your friend pays on time.
- Even with a repossession, you still may be responsible for the entire debt.
- Emily Peter’s horror story and blog.
- Federal Trade Commission on Co-Signing a loan