Thank goodness for parents. That’s the word from the millennial generation, which often relies on Mom and Dad to co-sign for everything from student loans and car loans to residential leases and credit cards.
According to a new report from Experian, two-thirds of millennials, made up of those born between the late 1970s and mid-1990s, have used a co-signer at some point, most often relying on their parents.
Ken Chaplin, senior vice president of marketing for Experian Consumer Services, said:
Since the co-signer guarantees the person for whom they are co-signing will repay the debt on time and in full, it’s important that both parties understand repayment expectations and communicate guidelines so they can be confident in their credit decisions.
An estimated 8 percent of millennials either fall behind on payments or default on loans, putting them in bad standing. This leaves the co-signer on the hook to pay the debt, and can leave a lasting mark on them and their credit. Here’s how co-signers have managed things to this point:
- 32 percent of co-signers made payments when the primary signer wasn’t able to.
- A shocking 17 percent of co-signers didn’t find out about the late or missed payments right away.
- In 12 percent of cases with late payments or default, the co-signers’ credit score took a hit.
We’ve said it before, and we’ll say it again – co-signing is not a good idea, even if you’re trying to help out your child. The risks – responsibility for debt, potential credit rating hit and limited borrowing power – are things you should consider before signing anything.
Fellow millennials, if you can’t get a loan or apartment on your own, maybe you should just accept it, move on and claim your financial independence.
Are you surprised by the statistics? Share your thoughts here or on our Facebook page.