I was asked to co-sign financing for a car. What am I being asked to do and what does this mean for me?
If you co-sign a loan, you are legally obligated to repay the loan in full. Co-signing a loan is not simply serving as a character reference for someone else; it means that you risk having to repay any missed payments immediately. And if the borrower defaults on the loan, you will have to repay the entire loan yourself, and your credit score may go down.
Your credit score may also be affected if the borrower is late with any payments. Co-signing a car loan does not mean you have any right to the car, it just means that you have agreed to become obligated to repay the amount of the loan if the primary borrower does not.
Co-signing a loan may also affect your ability to obtain loans for yourself because you have taken on the obligation to pay the loan. Lenders ask for a co-signer when they do not want to take on the full risk of loaning money to that particular borrower. Read the terms of the loan and consider carefully whether you wish to take the risk of co-signing.