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During this festive season, we often spend more time than usual enjoying get-togethers with our families. The early, chilly nights coax us to spend more time indoors, hanging out with brothers and sisters and aunts and uncles and nieces and nephews.

Family bonds are strong. Most of us would do anything for family. So during family time this season, you might have a sibling pull you aside and quietly but politely ask you if you could co-sign a loan.

Requests like these put you in an awkward position. You might not want to co-sign anything, but the sibling is, after all, family, and his or her circumstances might be dire, so maybe you feel like you have no choice.

If you are thinking about co-signing for a loan, here are the credit implications you need to be aware of:

●Co-signing a loan is just like getting a loan. Don't make the mistake of thinking that it is some sort of secondary action that has no consequences for you.

●The lending company will pull your credit report. Every time your credit report is pulled by a lender, your scores go down slightly.

●Co-signing a loan will impact your credit scores if your relative pays late or skips payments altogether.
As the co-signer, you will be equally responsible for the amount owed. If your relative doesn't pay it back, you will need to do so, or face the consequences.

Co-signing is a serious responsibility. It's no different than applying for a loan for yourself. So take the request seriously and think twice about co-signing, even if it's a family member asking.

If you do choose to co-sign, here is what to do:

  • Limit the loan you are co-signing on to an amount you can fully pay off yourself if your relative is unable to pay it.
  • Ask that the payment requests be sent directly to you and request that your relative pays you. Then forward the money to the lender. That way, you will always be aware of payment due dates, and you can ensure for yourself that no payment is ever late.
  • Keep careful records of all payments received from your relative and paid to the lender. This will protect you if your relative disagrees with how much he or she owes. It will also help protect you if your credit report is hit with a late payment notice in error.

There's nothing wrong with co-signing a loan, but make sure that you are aware of the risks and that you protect yourself as much as possible. Remember that money issues are one of the most common ways families can be torn apart.

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