It’s possible you’ve never heard the term cosigner. And if you didn’t have family drama before, this may be the thing to disrupt an otherwise harmonious relationship.

Maybe, you feel blindsided. You’ve been completely let down numerous times, and worse, you now need to ask a family member for a favor. It doesn’t seem fair. OK, let me explain. I’m talking about a little something we like to call, “The Cosigner Conundrum.” This happens when you’re all geared up to buy a car only to be told repeatedly, “You won’t qualify for a car without a cosigner.” Here’s a short story to better showcase how it all goes down.

There you are, at the dealership. You’re feeling supremely proud of yourself. It’s the right time for a new car, you’ve done all your research, and you spent hours selecting the perfect car for your lifestyle. You can envision yourself driving off the parking lot and posting that first shot of you in your new car to your social media. The best part? You can confidently afford the monthly payments. You have a good job, stable income, and your new car is one of your “hashtag goals.” It’s your turn in line. You’re ready to tuck your keys away. There’s just one problem. They run your credit and then you hear the dreaded words spoken in what seems like slow-motion, “You don’t have enough credit to get a car on your own.”

First, you aren’t sure what that means because you’ve definitely used credit cards and have made payments on said credit cards, too. You then learn you have what is called a “thin file” which means, you don’t have a long line of credit history that will give the lender an idea of your abilities to make good on your payment commitments. It’s disappointing, especially since you’ve been paying all your bills on time. If only there was a way for someone to step in and advocate on your behalf. Spoiler alert: There is. It’s us, Suretys! But, back to our story.

The Moral Dilemma

The next best thing, you’re told, is to get a cosigner on board. A cosigner is typically a significant other, a parent, or relative. The cosigner will secure your loan by appealing to the lender with their good credit score, salary, and payment history. This is done in the same manner that prevented you from securing a loan on your own. According to ramseysolutions.com, “The bank wants a cosigner for a reason—they don't expect the friend or relative to pay.” Once the lender determines your cosigner passes the test, you’re good to go. The only setback is the possible destruction of a close relationship and ruining their credit. No big deal. This is a real moral dilemma. You don’t want to put your family in a compromising position; one where they may risk their own credit for you if you accidentally miss a payment or can no longer afford to make your payments. Even with the best intentions, it is possible that you can lose your main source of income, or you may be late on a payment. You go home and you do the only thing you can do.

Let’s Talk Point of View

Here’s how the conversation goes:

Applicant: “Can you cosign on a car for me? Please?”

Parent/SO/Relative: “I don’t know, what are the risks?”

Applicant: “No risks. I’m going to pay my lease every month, I promise! I have a great job!”

Parent/SO/Relative: “Okay, I think this is a good opportunity for you to be responsible for your own finances!”

Cosigning should be a financial and logical decision, however most decisions are made emotionally leaving all involved in a risky situation. Family members pacify themselves with the knowledge that they are related to the applicant and “knowing them” means they will pay on time, yet there’s no guarantee. They never intend to disappoint their family. Except they do, a lot of the time. Nearly 40% of the time. Now that’s an awkward family dinner.

What Happens if You Don’t Pay?

Before we get to the good stuff and talk about how Suretys saves you from ruining family relationships, we need to discuss the consequences a cosigner can face.

Here’s where things can really take a turn. A cosigner may think their job is over once they’ve signed off on your loan, but that’s far from the truth. While you drive all over town in your shiny new car and your cosigner is framing their loyalty certificate for their mantle, things can get a little murky when you miss a payment. You’re not only personally connected to your cosigner, now their credit report will remind them of you for years to come (and not in a good way).

Cosigner Consequences

Here are 5 financial consequences a cosigner can face:

1. 1. 1. 1. 1. 1. 1. 1. 1. 1.  A missed payment is now a cosigner’s missed payment. If you miss a payment, your cosigner will need to pay out of pocket for you.

                        2. 2. A cosigner’s debt-to-income ratio will be impacted, and they may have trouble securing their own loan or line of credit. The applicant’s loan will also appear on a cosigner’s own credit report, along with any defaults or late payments.

                        3. 3. If an applicant doesn’t pay and the cosigner doesn’t come to their savior, the lender will start the recording process for credit bureaus, and the cosigner’s credit score can tank FAST.

                        4. 4. There’s no going back. A cosigner is legally bound to that loan. Unless an applicant assumes the loan on their own or can refinance (unlikely), a cosigner is stuck.

                        5. 5. Possibly the worst consequence and possibly the least contemplated, is the emotional damage and turmoil this arrangement can cause in a relationship. This may be an older relative’s last chance to invest in a business or real estate and cosigning can mean they no longer have that opportunity. A parent may have taken a chance on a child, hoping to inspire responsibility and now that responsibility is their financial loss.

Suretys: Meet Your New Significant Other

Suretys knows buying a car is complicated. Convincing a parent or a friend to cosign for you adds a lot of pressure. What if you had your own PLUS ONE? Suretys replaces the need for a cosigner and becomes your PLUS ONE. The proof is all in the word “significant”: SIGN IF I CAN’T! Suretys takes the weight off while you take the wheel. Learn more here and visit Suretysplusone.com to join the movement.