Co Signing A Loan

[Rolo Tomasi]

Looking for some advice on the pros/cons (mostly cons) of co-signing a loan. A friend wants to start a business and has asked me. On-line stats say in 70% of the cases the co signor ends up paying back the loan and impacting
their credit score. Anyone co-signed in the past? I know many factors, size of the loan, reliability of the friend, business acumen to make the business a success, etc. I hate being placed in this position. Friendship strained already
with the asking and me delaying a decision.

 

[jgg]

Don't. If the business can not make a case for itself then it is too risky. There are "angel investors" and venture capitalists that may be interested if the proposal has any strength.

You are in a tough spot unless you have burn capital.

 

[badbadboy]

Don't.

Friends and family can be the worst partners imaginable.

 

[Gardener]

DONT!!
Nothing but downside, no upside. Risk/reward relationship terrible for you. Plus, never mix money and friendship.

 

[giaebonyprincess]

Just think..........

If a bank doesn't trust them, then why would you!!

What would Judge Judy say

 

[westwoody]

NO NO NO NO NO

Strained already? How strained will it be when you have to hound him for a payback?
If your friend thinks he has a right to your money he is no friend.

Former best friend/partner and MY GIRLFRIEND were fucking behind my back. Ruined me for years.
Left me with debts and criminal charges and in trouble with Revenue Canada.

NO NO NO NO NO

DO NOT EVEN THINK ABOUT IT

 

[Rolo Tomasi]

Thank you for all your input on the topic. Much appreciated. Confirmed what my gut already was telling me: walk away. Loan would be for $200,000. Friend wants to purchase an existing business downtown Vancouver.
I feel like, "Why me?" Yes, if bank already has their doubts about the person and loaning them money, why should I have confidence with my own money? Friends and family are the worst to make loans to, as they become gifts.
Few years ago, I loaned $1000 to a friend, expecting to get it repaid in a few weeks. Took 5 years! Even consulted small claims court. They said even if you win the judgement, no guarantee you will get your money back.
This "friend" only repaid the loan after another friend intervened on my behalf. They just stop listening to the person hounding them to get their money back. Nope learned my lesson. Again, thank you for your sound advice!!

 

[zed444]

The thing is - you aren't being repaid anything in this case. You are putting your collateral on the line on their behalf to secure their loan. If they default on the loan, you're on the hook for the balance owed.

I'd avoid this at all costs - regardless of the money between friends ruins friendships part, and regardless of your friends' best intentions to make a go of this business, is it worth losing your home over?

 

[giaebonyprincess]

Whats the saying, fool me once..........................

Hi handsome Rolo Tomasi could you lend me 10,000..I promise to repay you....pretty please with whip cream on top of my chocolate nipples




Please I will wear nothing under this dress for you...oh cum on..I said please blink blink!!

I am just kidding...never lend money, unless you don't really care for it back. I think you learnt this already.​

 

[JonnyBoi]

If you guys know what you're doing and this is a partnership I don't see why both people cannot take up equal amount of liabilities. But based on what you said, I think the guy is just trying to piggie-back off of your good credit as his/hers is insufficient. tooons of red flag.

I hope no one ever makes that mistake. I never mix friends with finances, I rather just pay for the meal as a gift rather than doing a loan to them.

 

[vhyvhy]

I think the answer to your question has already been addressed, loud and clear.

Instead of getting a loan from the retail banks, your friend may consider approaching Business Development Bank of Canada (BDC). They do finance business acquisition provided the financial is sound and going concern is not an issue. Your friend needs to have some skin in the game as well, but that should go without saying. There's also the Canada small business financing program (CSBFP), but the bank he has spoken to should've exhausted that option before requesting a co-signer. BDC's rate may be a little higher than retail banks (commercial loan is always higher anyway). If cost of borrowing has been factored into the price and it's still a good investment then it shouldn't be a show stopper.

 

[storm rider]

Good credit takes a lot of effort to build

That being said there is no fucking way I would co-sign ANY loan.I have spent the last 20 years in getting an almost perfect credit score and in that same time frame I have gone through a divorce and had to hit the re-set button with regards to my life.Never co-sign on ANY loan as your financial balls are being strung out on the line.

SR

 

[Banger77]

NO NO NO NO NO

Strained already? How strained will it be when you have to hound him for a payback?
If your friend thinks he has a right to your money he is no friend.

Former best friend/partner and MY GIRLFRIEND were fucking behind my back. Ruined me for years.
Left me with debts and criminal charges and in trouble with Revenue Canada.

NO NO NO NO NO

DO NOT EVEN THINK ABOUT IT

Wise words. Sorry but this person is not much of a friend, if asking you to risk your financial life.

I feel like, "Why me?" Yes, if bank already has their doubts about the person and loaning them money, why should I have confidence with my own money? Friends and family are the worst to make loans to, as they become gifts.
Few years ago, I loaned $1000 to a friend, expecting to get it repaid in a few weeks. Took 5 years! Even consulted small claims court. They said even if you win the judgement, no guarantee you will get your money back.
This "friend" only repaid the loan after another friend intervened on my behalf. They just stop listening to the person hounding them to get their money back. Nope learned my lesson. Again, thank you for your sound advice!!

It seems like you already had your doubts, listen to your bad gut feeling.

 

[summerbreeze]

Looking for some advice on the pros/cons (mostly cons) of co-signing a loan. A friend wants to start a business and has asked me. On-line stats say in 70% of the cases the co signor ends up paying back the loan and impacting
their credit score. Anyone co-signed in the past? I know many factors, size of the loan, reliability of the friend, business acumen to make the business a success, etc. I hate being placed in this position. Friendship strained already
with the asking and me delaying a decision.

polite way is to just state that you wish you were more qualified to assess the venture however it is not your area of expertise and that you are also not in the finance business

while you are sure it would be acceptable to someone who could assess it and to an entity who has expertise in the lending business and as such there are better folks for the friend to be talking to

without the expertise, you would really be forwarding money as a gift with only luck on your side as to any return, it does not reflect poorly on your friend as you are sure they are hard working, honest, and have a viable venture, just a lack of business acumen on your side

no doubt the person will try several tactics with you but just keep repeating that you don't feel you are able to assess the risk

fall back would be to say that if the friend found someone who was qualified, you might consider a loan beside them under the same terms they had

side note, no one loans money like this anymore, only fully collateralized loans these days under a general security agreement

 

[johnsmit]

Honestly
If your friend is wanting to borrow 200 k to buy a business and has to ask for a co signer the they have no assets or income to qualify for a loan and should not even be looking at buying a business.

They are basicly asking you to loan them 200k with no collateral and no share in the business.

They need a partner not a co signer. But if they have nothing to bring to the table they won't get that either.

Does not sound like a great friend when they are trying to use you.

 

[MRGREEN]

Co-signed on a rental lease (sister), after 5 years and a few renewals I figured I was off the hook, apparently I wasn't. Fortunately it was only a couple of months of arrears. Now that I'm semi-retired and draw most of my income from investments I have too little actual "employment" income to qualify as a co-signer......... sorry bank, lease office say no........ problem solved

MG

 

[Sonny]

Don't. Friends and family can be the worst partners imaginable.

I can unequivocally confirm the absolute truth of BBB's post. Through hard experience.

 

[UhOh]

My only response would be to laugh cause there's no way I could take that as a serious question. I don't need friends like that.

 

[badbadboy]

I can unequivocally confirm the absolute truth of BBB's post. Through hard experience.

It's a nightmare ongoing for me at this time.

Constant denial "I never said that, you should have got that in writing".

Then there's the not returning phone calls or emails.

Eventually lawyers will be involved though we all pledged to 'work through it'.

Family (goes for friends too), God love em but don't do any business with them, ever.