17 December 2010

That’s why there are a few things to do before signing any documents:
1.    See if you can afford paying off the whole debt, if the other borrower can’t do it.
2.    Consider all the consequences of it:

•   You’ll reduce your credit rating if the debt isn’t paid off in time;

•   You’ll be contacted by a debt collector who’ll demand the whole debt repaying;

•   And, in the end, your relationship with the borrower will be seriously affected.

3.    Always make sure you really understand all your rights and responsibilities before signing any documents.Read the loan agreement carefully and if you don’t understand something or if you’re not sure about some of the items, ask your lender about it.
If you’ve already become a joint borrower, try to follow these small rules:
1.    See if you regularly receive copies of all agreements and account statements.
2.    Try to ask the other borrower to get loan insurance to pay it back in case of illness or death.
3.    When the loan has been paid off, make sure to get the written confirmation from the lender. In case of a mortgage there may be a certain fee for it.  
Of course, the joint borrower option works more often for a family member, but in case of co-signing for a friend or colleague it’s still very important to think seriously about all the possible consequences before signing the documents.