It's stupid to guarantee
Someone else's loan.
By Keith Bunn Jr.
March 26, 2012
I’ve never done it myself, co-signed loans that is. It just never made any sense to me. Why would anyone co-sign for anyone? Think about it, banks, mortgage companies, credit card companies, etc… spend and make millions to billions of dollars a year making loans to people, so if they won’t give your family member or friend a loan, there is a reason. It is because they have a high probability of not paying the loan back! And this isn’t because your family or friend is a bad person, it’s because mathematically they can’t. But if you are determined to co-sign for your family or friend, ask yourself these three questions first…
1. If I co-sign for this loan, will I be mad, upset, or have hurt feelings towards my family member or friend if this loan goes bad and I have to pay it?
2. Am I giving a drunk a drink? Meaning, am I enabling them more than I'm helping them based on what they've done in the past with handling their money?
3. Have they gone bankrupt, has something been repossessed or foreclosed on?
If you answered yes to either one of those questions, you shouldn’t co-sign the loan because chances are, you will have to pay the loan, your credit will get dinged, and your relationship will be either damaged or destroyed. In my opinion, there is no dollar amount worth that.
Now I want to warn you. When you tell your family member or friend no, be ready to be told that you don’t love or care for them, that you’re the bad guy for not wanting to help them out in there time of need. All you need to tell them is that you do love and care for them and that your relationship with them is far too important to you to have it damaged or destroyed over this loan. They probably still won’t understand but as my dad use to say (and I don’t mean to sound cold), they will either be mad an awfully long time or they’ll get over it. 9 out of 10 times, they’ll get over it.
Now there are two more quick things I’d like to share with you. First, the last two questions you asked yourself above should also be asked when thinking about loaning money to your family or friends and for all the same reasons too. It’s just not worth the hassle. Finally, everything we just discussed is biblical. The title of this blog is from Proverbs 17:18 CEV. If you want a nicer translation try the New Living Translation “its poor judgment to guarantee another person's debt or put up security for a friend.”
As with all my blog posts, and social media posts, I welcome any comments and feedback on the topics I write about. It is the only way you and I will learn more about ourselves and each other, so ask away!
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