More Than 1 in 3 Debt Co-Signers Lose Money

Photo (cc) by nerdcoregirl

More than one-third of people who co-sign for someone else’s loan or credit card end up literally paying for it, a new survey shows.

CreditCards.com’s survey of 2,003 adults living in the U.S. found that 38 percent of co-signers had to pay all or some of the debt because the primary borrower failed to pay it.

The repercussions for co-signers don’t stop there, though. The poll also found that:

  • 28 percent experienced a drop in their credit score because the person they co-signed for paid late or not at all.
  • 26 percent said the co-signing experience hurt their relationship with the person they co-signed for.

As we’ve explained in stories like “Answers to 10 Key Questions About Credit Cards,” co-signing is risky not only for your pocketbook but also for your credit score. If the primary borrower makes late payments — which you may never know — it could hurt your credit score.

Bottom line: You shouldn’t co-sign unless you’re ready and able to assume the debt as your own in the event your co-signer — for whatever reason — can’t pay.

The survey found that 17 percent of adults reported having co-signed for a loan or credit card. Co-signers tend to be:

  • At least 50 years old: Most co-signers are 50 to 64 years old (accounting for 24 percent of co-signers).
  • Wealthy: 24 percent of people who earn more than $75,000 annually have co-signed, compared with 11 percent of people who earn less than $30,000.
  • Helping a child or stepchild: Co-signers most commonly co-signed for a child or stepchild (45 percent), followed by a friend (21 percent).
  • Signing for an auto loan: People are most likely to co-sign for auto loans (51 percent of all co-signings), personal loans (24 percent), student loans (19 percent) and credit cards (16 percent).

For another reason why you should reconsider becoming a co-signer, check out “How and Why to Keep a Stellar Credit Score in Retirement.”

If you or someone you know is struggling with common types of debt or is prepared to take on new debt, check out:

Are you surprised to learn how often co-signing ends up hurting co-signers’ wallets or credit scores? Share your thoughts below or over on our Facebook page.

How to find cheaper car insurance in minutes

Getting a better deal on car insurance doesn't have to be hard. You can have The Zebra, an insurance comparison site compare quotes in just a few minutes and find you the best rates. Consumers save an average of $368 per year, according to the site, so if you're ready to secure your new rate, get started now.

Read Next
7 Mistakes Guaranteed to Ruin Your Retirement
7 Mistakes Guaranteed to Ruin Your Retirement

Make even one of these money mistakes, and you’ll probably end up eating ramen noodles in your golden years.

28 Things You Should Never Pay For — and How to Get Them for Free
28 Things You Should Never Pay For — and How to Get Them for Free

From entertainment to education, if you know the tricks, you can save big.

7 Reasons You Should Not Claim Social Security Early
7 Reasons You Should Not Claim Social Security Early

The sooner you claim your Social Security retirement benefits, the more you — and perhaps also your spouse — stand to lose. Here are the stakes.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Comments

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.

Trending Stories