Despite these liabilities, sometimes we still come to the conclusion that it is worth the risk to put our loved ones through school. This is an understandable personal decision. However, there are certain things that you should do to ensure that your credit is as well protected as possible. The following tips can help safeguard your finances when cosigning a loan.
- Make sure your student exhausts all scholarship and federal financial aid options before considering private student loans. Usually there are many options available that do not require a cosigner. If you make sure to take advantage of these first, you may not need to cosign at all, but even if you do, the amount should be lower.
- Borrow only what is absolutely necessary. Do not get loans to cover things like housing or food if there is any way to pay that using other means. Loans have substantial interest and fees that you will have to pay in addition and they can hurt the finances of everyone involved when they get too high.
- Don’t take out more than one years’ worth of the borrower’s anticipated salary upon graduation. This is generally the best rule of thumb for a limit of what is reasonable to expect to be able to afford. That means that if your child can expect to earn $35,000 in the first year, you should not borrow more than $35,000 total over the four years of school.
- Have the borrower sign a separate agreement with you that if you have to make payments on the loan, that they will pay you back. This protects you legally in the case of missed payments.
- Get life insurance for the borrower just in case. That way, you are able to cover the loan in case of unexpected tragedy.
- Take an active role in setting up payments after graduation. Help the student enroll in automatic payments or make sure that the check goes out on time. If you are involved in the loan from the get-go, you ensure that the loan is responsibly taken care of.
By taking these precautions, you will be better prepared to handle the financial implications of a student loan. The more safeguards in place before signing the loan, the less likely the loan is to be a financial burden that follows you through life. Don’t take any decision to cosign a loan lightly. In the end, you are ultimately responsible for paying off the loan.
Sometimes we get in over our heads with loans. In these cases, it is important to seek the help of an experienced debt help lawyer who can tell you what your options are and help you get your finances back in order. If you no longer can handle your debt burden, contact us at Luftman, Heck & Associates by us at (888) 726-3181 for a free consultation with an Ohio consumer law attorney to find out how we can help.