Should you co-sign a loan?
Posted: Wednesday, June 20
1 Kings 8:1-66
Verse of the day:
It’s poor judgment to guarantee another person’s debt or put up security for a friend. [Proverbs 17:18 NLT]
Have you ever been asked to co-sign a loan for someone? If yes, then congratulations. You must be a kind, warm and endearing person. I like to think of myself as a nice person.
Now do the right thing and say ‘no’.
If someone is trying to get you to co-sign with them, it is because they could not get a loan from a bank. When a lender does not feel an individual is a safe enough risk for credit another person can co-sign on the loan as a guarantor. Anytime you co-sign, you become legally responsible for the debt of another. It is just as if you went to the bank, borrowed the money and gave it to your friend or relative who is asking you to co-sign.
A Federal Trade Commission study found that 50 percent of those who co-signed for bank loans ended up making the payments. And 75 percent of those who co-signed for finance company loans ended up making the payments. Odds are, you’ll pay. When that happens the relationship will be forever changed. It’s nearly impossible to maintain a healthy relationship with someone after they default on a loan you co-sign; naturally you’ll feel taken advantage of. As a pastor I’ve talked with and prayed with enough people to know this is the case.
Perhaps you should consider whether it’s in the person’s best interest to get a loan in the first place. Is it in their best interest to borrow money they can’t afford to repay? At a minimum scripture makes clear that there is little benefit from borrowing money.
If through prayer you feel led to help someone financially consider giving them a gift of money without expectation of repayment or favors in return, which is what Jesus teaches in Luke 6:34-35. But co-sign a loan? You are not kinder than God or wiser than scripture. Just say no.