Your debt continues to pile up, but you think you have finally figured out a way to get your head back above water. While your loan application was declined, the bank officer informed you that if you could find a cosigner, it would be approved. Now you need to figure out whom to ask to cosign for your debt consolidation loan.
The reality of the situation is that you are in a very tough position. You now need to rely on someone else in order to get your finances in shape.
The person you choose is going to have to be someone you can trust, as well as him or her being able to trust you. It is very easy for finances to cause relationship difficulties.
In addition to finding someone that you can trust, you also need to find someone that has exceptional credit. Average or even good credit generally will not satisfy a bank. This combination can be very difficult to find and you may end up putting yourself into a very uncomfortable position with a friend or family member.
When you have finally made your choice, it may be best to keep them in the loop at all times regarding payments to avoid any future arguments. For instance, if your payments are due on the first of the month, send them an email letting them know the payment has been made.
Better to automate the process
Better yet, have an automatic payment set up that is deducted out of your checking account on a specific day of the month. When the confirmation email is received, forward it to them so they can see the payment has been made.
You are also going to have to consider what will happen if you are unable to make the payments. What if for some reason you lose your job? This is an ugly situation, but one that should be addressed before any signature is put on paper. Take the time to discuss this matter with your cosigner and have some type of agreement in place for this scenario.
Perhaps they pick up the payments until you are able to find a job. Once you are employed again, you could either resume the payments and pay them back after the loan is paid off or if you are able, make the payment to the bank as well as a small payment to them to repay them for the payments they covered.
This is something that may be quite uncomfortable to bring up, but you are better off addressing it prior to the loan signing than being faced with this reality and having no plan in place a year from now.
Basically, you want to have all of your bases covered when you select a cosigner. If you do not take the time to think things through and have these arrangements in place, you could wind up with a friend that is calling you every month to see if the payment has been made.
In extreme cases, they may call you every week just to make sure all is well with your job so they do not have to cover the payment. A situation such as this is nothing short of a lit fuse, with your temper being the bomb that goes off.