“Debt is the devil!” This is what a 62-year old client of mines said to me as I reviewed her finances and credit report with her. She racked up a significant amount of debt co-signing for a car, two apartments, and charging items to her credit cards for grown children and grand children. Now that the debt was there where do you think all of these family members were: Ghost! I knew who the real ‘devil' was and it wasn't her debt! (Okay, that was wrong, but you guys were thinking that too; who does that to their Granny?!).
Getting out of your own personal debt is hard enough, why add someone else's debt to the list? I don't care if it's your child, your man, your grand kids, your best friend or anyone else: NEVER EVER EVER get into debt trying to help a grown person out. If the arrangement doesn't benefit both of you, meaning it's tied to an asset that has the potential to increase in value and/or generate passive income for all parties involved; meaning you have personally researched the asset and know the risk involved; don't do it!
If a lender is requiring a co-signer on an application, they are pretty much saying that they are not willing to take all of the risk on this individual defaulting; when you put your name on the application as well, you are agreeing to share that risk with the bank. You are essentially stating: “I will pay for this apartment, this car, this loan, etc if the primary applicant is not able to pay.” If you can't make that statement confidently; you need not put your signature on that application.
This particular client of mines has a heart of gold. She really wants to help her children and grandchildren improve their quality of life. If you could have heard her blaming the credit system instead of the individuals that got her there, cursing the landlords instead of the ones that willfully stopped paying their rent without a moment's thought to her credit or their own; you would see that love is truly blind. If an adult has not learned to properly manage their funds, do not give them your money or credit in hopes that they'll treat it any better.
After we spent some time creating a debt settlement/payoff plan; we spent even more time learning the word NO. Every time someone asked her for anything – money, purchasing something for them, signing something in her name – she informed me and I told her to say no and gave her the reason why. In her case, she needs to start focusing on planning for her retirement and spending her remaining years in peace, and if her family can't support that they need to kick rocks.
If you are younger and no where near retirement, and your finances are not where you want them to be; you really can't afford to sacrifice your financial goals for anyone else's, no matter how good they are at begging. Does this mean you should be a scrooge, absolutely not. But if you give, GIVE FREELY. Give without expecting a payback. This means that the money you shell out isn't tied to a specific purpose. You won't give away your rent money, your mortgage money, your cell phone money, your car note money, etc.
And, if we're talking about your credit? That's not even up for discussion. The answer is always no. If you truly value your relationship with that person, do not allow finances to come in between it.
