Back when I was 17 and a sophomore in college, my parents ran out of money to pay my tuition.
So I started preparing to end my undergraduate career, pack up shop and head back home since there was no other way to rustle up some cash and loans were out of the question without a cosigner.
It took everything within me to muster up the guts to make the phone call, layout my shortcomings in preparing for college, and ask for help in the form of a cosign.
Of course, I prodded that I’d pay it back. That they wouldn’t have to do a thing. That I would NEVER screw them over. And that I’d be sure the graduate – check the previous g.p.a.
And guess what?
They said no.
I’m not going to lie. I cried that day.
How could they think I would default? They wouldn’t have to pay anything so what was the big deal? What’s going to happen now? My college career (and since I was a teenager, obviously my life) was over.
I thought I was done.
But you know what happened?
I found another way.
I got over the rejection and did what I had to do.
You never know what life has in stored. And cosigning on a loan can have a huge financial impact. That’s why 95% of the time, you shouldn’t cosign for a loan for anyone. But just because you can’t help with a cosign it doesn’t mean you’ve doomed them, and it doesn’t you can’t help at all.
In fact, here’s a list of 5 ways you can help that won’t put your financial security at risk – some of which puts people in a much better position because you teach them how to fish
Just give them some cash
You might not be able to fund the full amount of the loan, but you can offer to provide cash (as a gift) or even offer to match how much they can come up with on their own.
This forces folks to get creative and motivated them to find previously overlooked avenues
You can help them improve their credit
You can add them as an authorized user to your card (where you keep the card of course), so they can build up their own credit and qualify for a loan on their own.
And that’ll be useful even further in their financial future.
Point them to other resources they might not have considered
Government student loans, consolidation branches or credit unions that might be more lenient are all very good options. You can also help them find scholarships, write hardship letters or internships to help foot the bill.
And checking with your own company benefits, you might find company scholarships/sponsorship available to employee family members (that’s a smaller pool of applicants, increasing the chances).
You don’t have to do everything, but helping with the process can show that you care and willing to help in other ways.
Borrow or lend the money yourself
If you want to help with cash but don’t have the money, then take out the loan yourself and have then pay you back. For example, you purchase the house and rent it back to them until they can afford to refinance the loan themselves.
You can set up the monthly payments so if the person is late, it doesn’t impact your credit and you’ll know right away if there is a problem.
This puts you in complete control and the owner of the asset. If this seems too much for you then remember that this is what you are agreeing to when you offer to cosign anyway, however, in this method the borrower is paying you back and you are paying the lender back.
Be firm, honest, but sympathetic with your no
Telling someone ‘no’ can be hard. Especially when it’s denying a cosign request.
There is so much emotion on both sides. Having to discuss your financial situation mixed with high hopes and a hint of desperation doesn’t help the situation. But at the end of the day, if you can’t do it, you can’t do it.
You don’t have to be a jerk about it. You don’t have to go into full detail on why you can’t or explain why you won’t. You don’t have to hold it against them that they asked. And for the love of all things good, don’t keep bringing it up every time you see the person.
‘I know it was difficult for you to ask for help, unfortunately, I’m not able to help you in that way. What I can do, however, is help you by …. ‘ Is perfectly acceptable and decent.
‘I know it was difficult for you to ask for help, unfortunately, I’m not able to help you in that way. If there is any other way I can help you let me know …. ‘It also works too.
So I want to hear from you
Have you ever been asked to cosign for someone? Did you do it? How did it turn out?