Is Guaranteeing a Loan safe?
Every now and then, you may come across the occasion where somebody else asks you to guarantee a loan for them. There are a number of things to consider before you agree.
Another word for guaranteeing a loan is co-signing. It constitutes a promise to pay another person’s debt if that person fails to do so. Some cases where a co-signer is required includes renting real estate, loans to people with bad or low credit, and mortgages. Usually the agreement has to be in writing, and forms a legally binding contract.
A guaranteed loan is one in which you are assuming secondary responsibility for the terms of the loan. It is actually the worst sort of liability that you are preparing to assume: you are letting somebody else make you responsible for a loan whose terms and conditions you cannot pick yourself. The interest, the fees, the time span, all of that’s out of your control, but if the borrowing party reneges, it’s going to suddenly become your bill.
Since you are acting as a third party, it is your position to investigate both the lending and borrowing party. You should look closely at the lender and see if the terms of the loan are acceptable to your circumstances, should you fall into the position of being responsible for it. You should look even closer at the borrower’s circumstances - in some cases, you have the right to demand to see a credit check, past borrowing history, pay-stubs, or whatever else it would take to verify good credit standing, exactly as if you were the person loaning out the money. Just to keep on top, here’s another article on loan fraud.
In most cases, this will only happen when a relative asks you to co-sign. For that situation, the person’s past credit history ought to be generally known to you already, particularly if it’s your offspring or a sibling. For a personal friend, however, that had better be a very close friend and furthermore you might consider asking for some kind of security deposit for yourself.
It is only in very unusual circumstances that a borrower should need a co-signer anyway. Most people should be able to get all the loans they need with the assets they have - in this day and age of payday loans, mortgages to bad credit and no credit consumers, and various debt consolidation services, a person who needs a loan, can’t get one, and doesn’t even have collateral or a blood relative to co-sign should raise a big, red flag in your mind.
So proceed with caution, and whatever you do, never let somebody rush you into making such a decision. If you just want to be fixed up quickly with some cash without too many hurdles here’s a popular and reliable high profile payday loans site.