07:31 08 December 2013
When you are young and do not have established credit one of the first things you will end up doing is looking for a co-signer for your loan. In most instances, this is going to be a parent. It does not seem like a big deal and it is not, until you run into problems and fail to meet a financial obligation. The debt now becomes something your co-signer is liable for. And the responsibility to pay off the debt falls on their shoulders.
What happens to the co-signer?
When you default on a loan, the co-signer’s assets now become open to the court. The lenders are able to go after that person to obtain the funds necessary to pay the debt. Their credit rating can be negatively impacted and that can create serious issues.
It can be even more difficult to handle the debt if you have a co-signer and you want to avoid defaulting by going into a debt management programme. Debt management programmes use an individual voluntary arrangement (IVA). This arrangement allows the management company to put everything into a single manageable payment. The co-signer however, has to include their assets.
To resolve the issue:
Getting started in the world of credit can be difficult. Having someone to co-sign a loan can help, but it is important that you manage your own finances and the debt before obtaining it.
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