Co-signing a loan? Think twice

Canada, 11th October: Are you thinking of co-signing a mortgage loan? Well, pause a little and take time before doing so.  

Canada, 11th October: Are you thinking of co-signing a mortgage loan? Well, pause a little and take time before doing so.

There are many who consider the idea of co-signing a loan after failing to become qualified for a mortgage loan on their own. But, doing so could eventually lead to your bankruptcy.

Such an unfortunate condition happens quite often, cautions Todd Morin, a financial planning advisor with Investors Group based in Ottawa. Many a times, daughters or sons do not allow their parents to meet their grandchildren until the parents agree to sign a co-loan.

Hence, the advice by Morin to all his clients is to exercise care before accepting such a proposal while considering their financial conditions.

While many of us might feel obligatory to help our children, doing so could result in jeopardizing our own future financial position. So, its important to assess the result of co-signing a mortgage loan or any other type of loan.

Co-signing a loan means making a commitment towards a financial institute for the repayment of the loan amount in case the other party fails to pay back. And if the other party, which, in this case, is going to be your children, does not make payments at required intervals, then you are at a risk of being issued a court order for repayment of the whole debt amount.

No doubt, there are certain cases which require a co-signer, the executive director of Consolidated Credit Counseling Services of Canada, Jeffrey Schwartz states.

These include a minor without any established credit. Some other situations requiring a co-signer include anyone poor credit record or less credit for any purchases. Another situation includes a person having less cash inflow, states Mr. Schwartz.

What should you do—–?

• So, before co-signing any loan, it becomes obligatory on the part of the potential co-signer to examine carefully to know the category under which the loan falls.

• Also, don’t hesitate to ask yourself whether the entire loan can be afforded by you. This can be done by making a budget to know from where the amount will come from.

• You may state to your relative that your obligation as a co-signer is only for temporary period and you want it to end with the loan term.

So, with all these points in your mind, you can save from putting your financial security at a risk.

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