When you co-sign or guarantee a loan for someone, you are taking on risk with no return. Lenders refuse to give a loan to someone when they are too much of a risk. Consider the following about co-signing or guaranteeing a loan for someone else:

1. The lender does not have to go after the person you are co-signing for first if there is a default on the loan.
2. You are not protected even if the lender goes after the other person first.
3. The lender will not necessarily let you know if there is a missed payment so that you can correct the problem.
4. If your name is on the title, you are liable for any problems that arise from its use.
5. Even if you do not put your name on the title, you can still be liable.

More information on each of these points is included on our blog at http://www.legalees.com/co-sign-loan/.

When you are asked by your child to co-sign a loan for them because they do not have the credit to get the loan, be very careful. In deciding that you will co-sign you may be taking on more than you realize.  In Vermont there was a case where a grandmother co-signed for a grandson to get an auto loan. She knew her grandson was a bad driver.  Soon after, he hit someone with his car.  She was held liable.

Be sure you know the risks before co-signing a loan. In addition to the monetary risk, you may be also risking your relationship with the person you are co-signing or guaranteeing for. If the loan goes bad that relationship is often damaged. Therefore I would advise you to avoid co-signing a loan.