Risks of cosigning loans
BOSTON, Mass. (Ivanhoe Newswire) You want to do the right thing and help out your kids when they need a car, or even a house. But hold on. The Federal Trade Commission says three out of four cosigners end up having to pay something on cosigned loans because the primary borrower fails to make payments on time.
To buy a car … Purchase a home … Or go to college …
You need money! Maybe your parent will cosign your loan? But mortgage sales manager Mary Marengi says parents should think twice.
“So, if you are a cosigner on a mortgage loan you don’t actually have ownership in that property, you only have the obligation to pay back that note. You are actually 100 percent obligated under the note,” said Marengi from Academy Mortgage.
Sue Brennan shared, “The first word that comes to mind is scary; cosigning a loan is a risk.”
A risk that went wrong for this mom. She got stuck with her son’s car loan when he stopped making the payments.
Brennan continued, “I have sleepless nights worrying about money. A car loan now is big money it’s not just 50 dollars a month.”
Patty Gabriel, a Senior Loan Officer said, “Don’t cosign a loan if you can possibly avoid it. Just don’t do it.”
Even this loan officer didn’t follow her own advice. She cosigned a home mortgage for her boyfriend. Now, two years later, he’s her ex-boyfriend.
“I should have taken my own advice. I know better,” Gabriel shared with Ivanhoe.
And Brennan is gambling again.
“Yes we are in round two ding ding,” she said.
Cosigning for another car. This time for her youngest son Shane.
Brennan said “So far it’s a brand new loan so it’s okay. But like I said it’s a risk.”
When a parent cosigns a loan, they are taking on more debt, and that can prevent them from taking out a car loan or buying a second home for themselves later in life. And that is because they are responsible for the loan they cosigned. So if you don’t have to do it, don’t. Data from the federal reserve bank of New York shows six million people are 90 days or more behind on their car payments right now!