by Curtis Carper

Created on: June 22, 2008   Last Updated: November 07, 2008

In today's financial world there is absolutely no reason for anyone to even remotely consider co-signing on the loan application for another individual to buy a car or anything else for that matter. If the person requiring a co-signer finds themselves in that position it's because they are considered to much of a risk for respectable financial institutions to secure the loan on their own.

This is a wake up call, red flags should be popping up all around them. What makes you better at judging their monetary well being then a respected bank or credit union.

The act of co-signing means you are ultimately responsible for every last cent of the loan being applied for. Nothing like paying $20,000 on a car that your buddy, sibling, or co-worker wrapped around a telephone pole and walked away from. If they let the insurance lapse that's exactly what would happen.

Even your own adult child should be left to handle their finances without your help or interference. Even first time car buyers can easily obtain credit, especially if they have a sizable down payment or trade in vehicle.

At age 20 I purchased my first new car. I did it the old fashioned way, I paid cash. I worked and saved my money with a goal in mind. When the time came it was a simple matter of walking up to the cashier and withdrawing my savings.

If you can't afford a fancy luxury model, then down size your wants to match your budget. Good used cars are available at reasonable prices. After all what you need is reliable cost effective transportation.

Banks and Credit Unions look at the risk from the point of view that if the person defaults will we loose money. Measuring the odds of default against the value of the collateral (the car to be purchased).

If you have an established record of a number of loans that have been paid on time with no late charges and you tend to do business with them on a regular basis they want your business. There is great likely hood that when you decide you want to trade your car in for that new shiny model that caught your eye in the dealers showroom, with nothing more then a quick signature you will be on your way in your new ride.

On the other hand if you missed payments, or let a car go back to the bank because of non payment. Or maybe totaled a car and left the bank holding the bag for the remainder of the loan. Sure it put some bad marks on your credit rating. Even after some years, they probably won't be willing to risk a loan without a co-signer.

The best way to fix this is to fix your credit. With a high enough down payment you will be able to secure a loan on your own. Yes it will likely have a very high interest rate attached to it. To bad, that's the price you pay for your past neglect. Pay it back early and in a very short time your credit will improve and you'll be back on track. Banks will once again accept you as a trustworthy individual.

Do not be an enabler, they can do it on their own if they really want to. When it comes to co-signing on a loan, JUST SAY NO! Pay attention, there's a reason they can't get a loan on their own.

Learn more about this author, Curtis Carper.
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