Most young people do not yet have credit of their own when they go out to college or get a job. As a result, if they need to borrow money for school, for a car loan or for a credit card, they may need or want a parent or grandparent to cosign the loan. Parents and grandparents may also be asked to cosign loans for apartments as well.
While it is very tempting to agree to cosign for a child who you care about, doing this is a big risk. Cosigning means that you become legally responsible for the debt that is taken on. The creditor will consider both the child and the adult jointly and severally responsible for the debts that are owed. As a result, if the child does not pay or declares bankruptcy, the entire burden of repaying the debt could fall to the adult.
Children who are dealing with debt problems and who are struggling to pay their bills need to understand their legal options. An experienced bankruptcy and debt relief lawyer at the Law Office of Ronald D. Weiss, P.C. can help.
Cosigning a Loan for Kids
Cosigning a loan for your children or grandchildren is usually not the best approach to take to help your kids. Student loans are designed for young people and lenders understand that kids won’t yet have a long credit history. As such, borrowing money for school doesn’t usually require a parent or guardian to co-sign.
For other types of credit such as a car loan, credit card or apartment, it is best to allow children to develop credit slowly on their own over time until they can qualify to borrow on their own credit. For example, an 18-year-old can usually sign up for a credit card upon going to college. While the card will have a low limit, the teen can use it to make small purchases and should pay the bills on time each month without carrying a balance. This will allow for the child to build good credit and within a few years it will usually be possible to sign for a car note, an apartment or a mortgage.
By avoiding cosigning, a parent or grandparent not only protects his own credit but also ensures that a young person cannot get in over his head and borrow money at too fast a pace. When a child builds credit slowly and avoids borrowing as much as possible, this can hopefully keep him out of debt trouble.
If you have already co-signed and your child or grandchild is considering bankruptcy in Long Island, it is important to understand the implications of this decision. A Long Island bankruptcy lawyer at the Law Office of Ronald D. Weiss can represent debtors in a bankruptcy filing and can provide you with the information you need about what happens to your debts during bankruptcy. Call or contact us online today to schedule a consultation and learn more about how we can help you.