Over the last few years short term methods of finance have soared through the roof. Such a sentence really shouldn’t be surprising – for a lot of people they have been the only option before financial ruin.
However, these very people who are applying for such loans usually don’t have the best finances. This is where cosigners enter the picture; other individuals who effectively guarantee the debt if you happen to miss a payment. Suffice to say, they are an extra layer of protection for lenders and in a lot of cases, everyone is happy.
It’s still worth remembering that using a friend, relative or partner as a co-signer really is taking the relationship a step further. Suddenly, both are embroiled in each other’s finances, and this is where things can get messy.
Bearing the above in mind, weâ€™ve put together the following guide. If you are considering entering a loan agreement alongside a co-signer, whether itâ€™s quick cash loans in California or a more secured method of finance in Texas, itâ€™s time to read on. Find out whether your relationship is really ready for such a commitment (itâ€™s not quite like marriage, on that note) and whether or not the individual you have chosen is a suitable candidate.
Can your relationship handle the commitment?
Hopefully you’ve already asked yourself this question, but we’ll put it out there anyway. You might “know” a person, but do you know them well enough to enter into such a financial commitment?
There has to be a huge degree of trust between the both of you. After all, if you do happen to default on a payment, this is immediately going to come out of the co-signers pocket. Unless you are on remarkably good terms with them, there’s a chance that this isn’t going to sit well.
Therefore, ensure that they have a good understanding of your finances and the likelihood that you will be able to stick to the terms of the loan. Additionally, make sure that if disaster does occur and you are unable to pay for whatever reason, this isn’t going to be a relationship-breaker.
Does the cosigner have a decent set of finances?
Asking anyone about their finances is always going to be a touchy subject, but you do need to have some understanding if you’re about to approach a potential co-signer.
While the requirements vary between lenders, most require that a co-signer has a debt-income ratio of less than 28%. If you have the slightest indication that your co-signer won’t be able to meet such requirements, it’s probably best to move onto another individual to avoid any potentially embarrassing situations.
Are they insisting that the vehicle title is in both names?
Finally, you need to make sure that the vehicle title is always only kept in your name. The bank may try and put both you and the cosigner on it, but try and avoid this at all costs.
If you are both on the title, your cosigner immediately has a lot of power over the vehicle. It means that a sale can’t occur without their permission and if things do turn sour in your relationship, for whatever reason, this is the last thing you’ll need.
The cosigner agreement only works when there’s a great degree of trust between the two parties, and this means avoiding title clauses like this.