I cannot tell you how many times I have gotten a call in the middle of the day from a family member asking me to co-sign for a loan. Thankfully, my brain is already programmed to say “NO!” For fifteen years I have been calling people and suing them on defaulted loans for which they co-signed. The first thing they tell me is, “Oh, my brother (insert other needy family member here) is responsible for that – I only signed because his credit was not so hot.” My response is always the same – if my client really thought your brother was going to be able to pay back this loan, they never would have required a co-signor.
Most of the time, when one of my clients sends me a case with a co-signor, I rarely if ever call the first person on the loan. No offense, but typically they are unemployed or underemployed, make little money, or have terrible credit. Why would I want to call them? I want to call the person who actually have the money to pay the debt. I want to call the person who actually has something to lose by being sued.
Aside from parents who co-sign for student loans for their children, most co-signors were called upon because the first person on the loan didn’t qualify for the loan on their own. Why? There are many reasons – income, collateral, age, and credit. The list goes on but there is one common theme – the person needed a co-signor because the lender did not believe they could handle paying the loan back on their own. And, consequently, when it comes time to collect the debt or file suit, I really don’t have time to listen to the same old sob story from the primary on the loan.
I’ve heard it all before. And, typically, they have told the same story many times to many creditors. They are used to collection calls and, therefore, are not really afraid of being sued. What is the bank going to get? Have you ever heard the phrase, “You can’t get blood from a turnip?” I have. And my response? “A turnip didn’t sign this contract – you did! The day I meet a turnip who carries a pen is the day I retire.” So, rather than waste my time with this familiar back and forth, I go directly to the source – the one person who does care about being sued – the co-signor.
Are there co-signors with bad credit? Sure. Are there co-signors who are in no better a position to pay than the primary? You bet. If all co-signors had a bottomless wallet I wouldn’t be in business. So what is the trick? I focus on co-signors with jobs, property and good credit. Why? Because these are the people who have never been sued, who do not want to be sued and who, once they realize my client means business, they are the ones who pay.
So, the next time a friend or relative asks you to co-sign for a loan – JUST SAY NO!!! No matter how much they beg, cry or promise you their first born, don’t do it. I do think that most people have good intentions when they borrow money – nobody sets out to intentionally not pay their bills. But, in the end, who is left holding the bag? The 22 year old college student with no job? The 40 year old relative who has been sued 3 times already but really needs that new car? You will end up holding the bag – trust me. I do this every day. And nothing feels quite as sad as calling someone out of the blue and blindsiding them with the fact that they must pay $10,000 immediately or face being s