Consequences of Being a Cosigner
As we know that a cosigner is required while we apply for any kind of loan, whether it is a personal loan or any other kind of loan. Basically, a cosigner is a person that is needed while sanctioning the loan. Cosigner promises to pay the applicant’s debt in case he is unable to pay. A bank usually considers a person as a cosigner if he has a good credit score and if he has been banking for a long time. The reason after that the bank or any other non-banking financial organization needs security while providing a loan. A family member or a friend can ask to do so. So if you are going to be someone’s cosigner in any kind of loan then you should know some important things.
- How does it affect you?
If you are going to be someone’s cosigner than the bank or the person is not asking you to do so just because your credit score is good, the reason behind this is you are agreeing to pay back the amount of loan in case that person is enabling to do so. Besides that, if that person stops paying back the EMI’s in between then you have to pay on his/her behalf until he/she starts paying again.
- What if you refuse to pay?
You are liable to pay the loan if the applicant does not, however you have not used that amount of loan. In any case, if you refuse the bank or the lender to pay the other person’s debts than it may affect you badly. It will make a bad impact on your credit history and your CIBIL score. As a result, you won’t be able to get any loan for yourself. You will be defaulter afterward. One more important thing is that the bank may hire a lawsuit against you to payback the pending amount of loan. The judgment will be against you and you have to pay the amount of the loan to the bank. So it is wise to convince that person to pay his debts or to pay by yourself.
- What should you do?
Unfortunately paying the loan or the EMI’s is the last and only the option you will have. Besides that, it is wise too to prevent yourself from the lawsuit. Sometimes bank also sell the property of the applicant in case he had any collateral with the bank. But in case the bank would not be able to recover that amount by doing so than you will have to pay the remaining amount of the loan.
The only way to rescue yourself from this kind of situations you should think properly before being someone’s cosigner. If you know that person very well and you are sure that he/she would pay his/her loan properly, only then be a cosigner. Otherwise, you are advised to no to be a cosigner of anybody. Because it can make harm to you in a long run.