A WEALTH OF KNOWLEDGE ARCHIVES

Borrow on Your Own Two Feet

September 15th, 2009, byMichelle Singletary

car-for-sale-bow

Q: My significant other just got approved for a home loan. I asked her to co-sign for a car for me. Would this affect the amount she was approved for? I don’t want it to affect her chances of getting the house of her dreams. So, I need some advice.

Veronica, Houston, TX

A: You are right to be concerned. If your partner co-signs for that loan, it may affect not just the amount for which she gets approved for a home loan, but also the interest rate she will pay.

When someone agrees to co-sign, they are agreeing to be your backup, just in case you don’t pay. The person is agreeing to pay the debt in full should you fail to make the payment. In some cases, the lender will contact the co-signer even if one payment is missed.

The debt belongs to both the primary borrower and the co-signer.

I suggest you and your significant other read an advisory from the Federal Trade Commission (FTC). As many as three out of four co-signers are asked to repay the loan, according to the FTC.

But if you need a co-signer for your car, that means you probably can’t afford the car, or you are getting a car that is too much for your budget.

My advice: Borrow on your own two feet.

Last modified: April 27, 2011 at 3:29 pm