The Washington Post ran an opinion column by an author explaining why she believed people should not co-sign loans for others. Indeed, co-signing loans can frequently get co-signers into trouble, particularly when principal debtors run into difficulties repaying the loans. You can read about the New York bankruptcy implications of co-signing a loan here. The Post‘s article relied on a telephonic survey conducted by CreditCards.com, which interviewed 2,003 U.S. households of which 388 adults admitted to co-signing other debtors’ loans. The survey contains a handful of findings debtors might find interesting.
- After adjusting the results for demographic factors, 17 percent of adults have co-signed a loan for another party. The write-up on CreditCards.com speculates that this low rate is due to wariness among adults of the potential adverse consequences of co-signing loans, but it may simply be that they have few opportunities to do so.
- By a large plurality, 45 percent of co-signers agree to help their children or step-children. Somewhat surprisingly, the next highest category was friends at 21 percent, rather than spouses or partners at 14 percent. The remaining amount is pretty evenly divided among parents, grandchildren, and siblings.
- The majority of co-signed loans are auto loans, 51 percent and double as many as personal loans. 19 percent were for student loans, and another 16 percent were for credit cards.
- Unsurprisingly, older people are more likely to co-sign loans. 24 percent of people in the 50-64 age bracket have co-signed loans, but only 22 percent of adults 65 and up have. By contrast, among 30-49-year-olds, only 14 percent have co-signed a loan. Given that so many co-signed loans are to the co-signers’ children and for auto loans, these figures make sense.
- Adults with incomes over $75,000 annually have co-signed loans at a rate of 24 percent, but those with earnings under $30,000 only did so at a rate of 11 percent.
- The survey discovered many downsides to co-signing loans. 38 percent of co-signers were required to pay some or all of a loan when the principal debtor did not.
- Additionally, 28 percent of co-signers suffered a credit-score penalty because the principal debtor didn’t pay on time.
- Finally, one quarter of co-signers believed co-signing the loan strained their relationships with the principal debtors.
The Post column can be found here, and the survey results here.
Co-signing loans can help a loved one get ahead, but often it complicates relationships. If a co-signed loan has caused you financial difficulties then you should talk to an experienced New York bankruptcy lawyer.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced bankruptcy attorney in Brooklyn Bruce Weiner for a free initial consultation.
