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Co-Signing for Sister

Chris Farrell Jul 10, 2008

Question: I have a sister who is currently applying for private student loans. She has no co-signer and is therefore subject to higher interest rates and is finding it more difficult to be approved for a loan. I’ve thought about offering to be her co-signer, but first I’d like to make sure I am fully aware of the consequences of being a co-signer. Would it affect my credit or ability to get other types of loans in the future? She needs to borrow around $16,000 for the entire year. I personally have nearly $40,000 in student loan debt myself. I’m 24 and have a stable income. I’m also very confident that she would pay the loan back herself. Thanks for your help! Any advice would be appreciated. Elizabeth. Eagan, MN.

Answer: Put it this way: When you co-sign you are taking on the responsibility to pay off the loan if your sister can’t. Period. It can affect your credit score and your ability to take out another loan. My personal preference is for family members not to help each other out financially by cosigning. It’s a legal document that carries a serious obligation, especially for someone like you who is just starting their career. If she does need your financial help and support, it’s much better to lend her some money privately in a pinch. The two of you just need to have an understanding of what that means-as sisters–without involving legal documents, credit reporting bureaus, credit scores and the like.

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