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In the fall of 2011, I went on an episode of “The Suze Orman Show” to ask her how to repair my credit, and I knew I was in big trouble when she told me there was nothing she could do.
My mistake was co-signing a mortgage for a friend, who ended up not making her payments.
It was just before the housing market crashed in 2008, when a close friend decided to make the leap from renting to homeownership. Like myself, she was a single mom. We had known each other since grade school, participated in the same Brownie troop. We talked on the phone daily and had more than 20 years of friendship between us.
LearnVest
Sibylla Nash is a freelance writer and novelist.
When, in the eleventh hour, the bank told her she needed a co-signer in order to close on the property, I said I would do it. I don’t even remember if she asked or if I just volunteered. It was a knee-jerk reaction to help a friend. I didn’t want to see her lose the opportunity.
That was my first mistake.
I didn't realize how bad it was
I was self-employed as a freelance writer. I knew the repercussions of co-signing … sort of. But I didn’t fully investigate exactly what would happen if she missed a payment because I assumed it wouldn’t be an issue. When I originally signed, I told her I didn’t want to be on the loan for more than a year. The plan was that she would refinance her home after a year of payments and get a new loan without me on it.
I knew how hard she worked to get to this point and felt that she would value her credit just as much as I valued mine.
I had to find out the hard way that co-signing on her condo increased my debt-to-income ratio (how much I owe versus how much I earn), which is not a good thing when you’re trying to buy a house or make any major purchases. At the time, I was trying to sell my house in New Jersey to move to Los Angeles. Mistake No. 2.
Everything went well for the first year. Unfortunately, the market was beginning to crumble. Before the real estate crash, banks were handing out refi’s like candy, but when my friend bought her home in 2009 they had started tightening their belts. She was unable to refinance me off her loan.
She lied, and I suffered
It wasn’t until the fall of 2009, when I was thinking about getting satellite television, that I checked my credit report and discovered $10,000 in past due payments. My friend had missed not one, not two, but three mortgage payments!
(Looking to learn more about mortgages? Check out the loans and mortgages section of our Knowledge Center.)
My credit score plummeted from 800+ to the low 600s after she defaulted on her mortgage. Several credit card companies dropped me, while others lowered my credit limit to the balance due.
I was embarrassed and ashamed about the multitude of letters I received from my creditors telling me they were cutting off my line of credit. Basically, I was left with no credit, no access to more credit and a horrible credit score. I was devastated, all because of my own mistakes.
Mistake No. 3: If I had been monitoring my credit (learn how here), I would have known the first time she missed a payment.
Were there extenuating circumstances that somehow explained her behavior? No.
She hadn’t lost her job and didn’t experience any major medical emergencies, so I don’t know how she managed to get so far behind. To this day, I still don’t know what happened -- even while she was missing her payments, we were talking on the phone nearly every day, and it never came up. Whenever we talk about her delinquency, she’s apologetic, but has never tried to justify it.
Her lack of communication and honesty destroyed our friendship. She wasn’t forthcoming when she realized she was in trouble, and going forward she wasn’t honest about her ability to pay. Today, we barely speak unless it has to do with the house (which I’ve never even seen, as I live in Los Angeles while she and her house are in New Jersey).
I’m on the road to recovery
As it stands, she hasn’t made a mortgage payment in more than a year and owes almost $30,000. We owe this amount. Co-signing makes me just as liable. The house has been under contract for a short sale and hopefully we will close soon (although I found out only three weeks before closing that she neglected to pay another $25,000 in outstanding dues, so who knows what will happen now). Mistake No. 4 was not creating any type of contract that outlined our agreement.
I wouldn’t recommend co-signing on a stick of gum for anyone after going through this. It is more trouble than it’s worth. If the friendship has to end because your friend insists that you co-sign, at least you still have your credit.
All is not lost for me. In order to bring up my credit score, I’ve been focused on paying down my credit card bills and student loans. For the last two years, I’ve used lump sums of my tax return to pay off my credit cards. In effect, I’m decreasing my debt to income ratio and showing that I am able to keep up with my obligations on time.
My credit score has inched up to 698. I’ve paid off two cards in the past two years. I have one more to go, plus my student loans, and then I’m done! That has been the most exhilarating part of this journey. I’m on the road to becoming debt-free (except for my own mortgage).
It’s also forced me to operate more on a cash-only basis because I have limited credit, which has the side benefit of helping me budget better and be smarter with how I spend my money. I don’t have the credit resources I used to have in case of emergencies.
It’s also prompted me to have honest conversations about credit and our responsibility with my daughter. It’s not that my parents never cautioned me about co-signing for someone, it’s just that I never thought the worst case scenario could happen to me.
(When talking to your children about money, keep from making these mistakes.)
I’ve learned the lesson that you never want to put your financial livelihood in someone else’s hands. And when you co-sign, that’s exactly what you do.
Sibylla Nash is a freelance writer and author of novels “Bumped,” “DreamCity” and more.
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Leave a Comment:
There is a really good lesson here and that is to be careful of one's indulgences. you don't help people you know by loaning money or co-signing etc. That goes for your kids too. If you have the money give it to them with no strings attached but charity is giving money to people you have no connection with such as starving children in Africa-America. My uncle asks me all the time why I don't give my money to my eldest sister and I keep telling my uncle out of six kids I am the only one who is solvent at this point and the only one able to take care of my ailing mother. You can give people, that are bad with money, a million dollars and they will spend two million. The more they receive the worse the consequences. If you don't believe me check on the statistics of people who receive windfalls such as lottery winnings. This story really is about the loaner not the recipient as the psychology behind this is we are all motivated by pain or pleasure and we make choices based on those two main drivers as long as we have shelter, security and food. A co-worker was, like me, in the street without a nickle as a youth and had to learn the hard way to success. Now he gives his kids everything including a college education and he thinks that is going to help them. His kids have never been on the high wire without a net and the first real problem that comes along is going to wipe them out. He tells me he does it for them and yet he brags about being the big provider to anyone who will listen. Again it is not about his kids. Secretly he admits to me they are all going to be in big trouble as they haven't learned who to fight and survive on their own. You think?
Otter from Animal House: "You f'ed up. You trusted us."
The old adage;
"Give someone a fish and you will feed them for a day, teach them to fish and you will feed them for a lifetime."
Isn't about fly fishing, it is teaching the life skills for survival, the MOST important job a parent has.
"Give someone a fish and you will feed them for a day, teach them to fish and you will feed them for a lifetime."
Teach someone to fish and he will buy a new fishing rod and reel, fishing tackle box, and fill it with tackle. Bait and bait box. Fishing license. A new Yeti ice chest, ice, and beer. A new boat, with trailer equipped with a big motor, and a trolling motor, anchor, with a fish finder, GPS, and all the safety gear. A heavy pickup to tow the rigging to the fishing location.
He will have payments for a lifetime.
Just need a co-signer.!!
Little guy - GREAT! LOL
Henry63
Great paragraph BUT ..... MOST people will read this with blind eyes and never learn from it, until they are in the boat without a paddle.
As far as credit scores, I have found they are never accurate and bounce all over the place when trying to research them......and I mean them. What ever happened to ONE score??
Not only are there 3 different scores the consumer sees, but the FICO scores given to your creditors, such as a mortgage lender, are different and not the same scores shown to the consumer.
That's a hard story. I guess you can chalk it up to the school of hard knocks. At least you know your friend wasn't a true friend. Unfortunately when the house does sell they will still come after you for the difference plus fees. They will most likely sell the remaining amount to a hard-nosed collection company.
Young people: Live and learn. I too trusted someone before I should have. And I was young, and inexperienced. So, here's some words to live by:
"No good deed goes unpunished."
Light-years ago, I helped my assistant manager whom I thought I knew well enough. That same person attempted to take my managerial position from me by writing a nasty letter to my supervisor. Fortunately, my supervisor was intelligent and knew it all to be false, and told me so.
A word to the wise. I'm sorry to tell you that this world isn't as nice as we would want it to be. Trust only immediate family, and even regard them carefully.
Henry63 gets it right. You don't co-sign for people, or lend them money, unless you are in a position to pay off the loan when they default, or to make a gift of the loan. When it all goes south, and you are left holding the bag, your friend will be so so sorry. Maybe. And you will be so so stuck with the bill. "I'm sorry" doesn't get the milk back in the bottle, and "I'm sorry" doesn't raise the dead. Learn from the mistakes of other people. What happened to this poor woman stinks. Don't let it happen to you.
It never fails.... Family and close friends can ruin your credit faster than the hands on a ticking clock... I also learned this lesson the hard way, my niece (sister's daughter) needed a car desperately. She was working and her deadbeat ex babydaddy ruined her fledgling credit.. I felt sorry for her and agreed to help (as requested by my father, her grandfather); I put a financed car in my name and let her make payments directly to loan agency.. Needless to say, three months later at 11 pm at night, she drops the car off with no explanation.. Why? Repo people were out looking for the car.. My credit showed the missed payments and credit score went down.. I scrambled at the 11th hour (literally) to catch payments up and repair car interior (she decided to hollow out behind back passenger seats and insert boom box sound system, which she promptly removed prior to dumping the car on me, leaving a huge hole in back of car).. As a result, I was left making car payments for six months on a car, I didn't want or need until a reputable buyer could refinance the car.
Who was the "heavy" in the family for holding my 23 year old niece financially responsible for her actions... ME!... Never again... NO Way!.. Love and support your family and friends... But, let them get out of their own financial problems.. Sometimes you have to lose and learn from your mistakes to rise above them.. It's called "Tough Love".
My personal experience is that "No good deed goes unpunished" It's up to you to make sure that the borrower has skin in the game!!.....................No skin, nothing to lose, no personal responsibility!! But most that are givers will always give and most that are moochers will always mooch, ..................... And they always swear it will be different this time and they've learned the lessons of irresponsible behavior...........................RIIIGHT!!
Disagree with one thing.
Loaning money is ok as long as you hold it as something you may never get back, ie getting it back is a PERK.
I have loaned two people money...two different friends....one before I had that attitude and one after. Ironically the first person never paid me back and I was upset about it....as I saw her husband buy a nice TV that costs about that....a TV nicer than my own. I learned my lesson. ...then next time I loaned money I had no expectation of getting it back
I offered it freely. I had it in savings, and the friend could not pay her rent and was terrified of becoming homeless....Terrified and not working/disabled.
We agreed she'd pay me back when life was better for her. I'd run into her periodically in following yrs she'd say things were great but not pay me back. Finally when things weren't so great for me I asked for it, she paid it back 100 dollars a month...and told me how much it had meant to her that I stepped forward in her dark hour of need...that' she'd never forget it, and hoped to be there for someone similarly someday.
it was worth the risk
Rule to live by..
NEVER cosign for someone...the bank has already determined they are a high risk...do you really think you are smarter than a bank?
NEVER lend money to family or friends...they wont pay you back and you'll resent them for screwing you over...
NEVER borrow money for non revenue producing items..in other words if you can't make money with it then pay cash to make the cost finite and known
Took the words out of my mouth. If you ever listen to the Dave Ramsey Show, he will basically tell you the same thing.
My sister messed over my dad on a car loan. I have seen other situations where the same thing happened. In my early 20s, my dad cosigned on a loan for me, and eventually my bad financial decisions led to some late payments that negatively impacted his credit. If I had listened to him to begin with, I would have gotten a much less expensive car and paid cash for it. Oh well.
Don't let the consequences of other people's life mistakes impact you too.
"NEVER lend money to family or friends...they wont pay you back and you'll resent them for screwing you over..."
The other way I've heard it put: Don't lend money to friends. You lose the money and you lose the friend.
It always seems to surprise people how, when you co-sign on a loan and the borrower defaults, your own established creditors start pulling back their credit (as the author describes when her credit cards started dropping her or lowering her credit limit)...
You must keep in mind that, when you co-sign, you're telling that creditor "I'll make sure that you get your money". Then, when you fail to make sure that they get their money, all of your other creditors (to whom you also gave assurances that they'll get their money) suddenly doubt how determined you are to see them repaid. To them, co-signing is "giving your word" just as much as taking the loan out yourself... and then your word isn't worth what it used to be.
How is it possible to never borrow money for non-revenue producing items? Cars and motorcycles are often purchased with loans, and most times the vehicles lose value immediately.
Cars in general aren't really investments on their value, but they can be used as a valueable tool to get you to work for revenue. To me, an automobile is more like an indirect investment.
Vehicles are "tools" just as a hammer is to a carpenter, when you elevate them beyond that, they become expensive toys or jewelry.
Just an unnecessary expense
to L in ATL,
It is very easy to buy a car or motorcycle without a loan. My husband and I have not had a car loan in over 18 years. We buy our used cars for cash. When we buy one, we start saving for the next one that we will probably need in about 6 more years. Our income would allow us to buy a new mid-range sedan or a new truck on credit, but if we have to buy on credit we believe we can't afford it. It would be hard to buy a house for cash, though, I have to admit. But so many people buy more house than they should. When we bought our house we were approved for a loan $80,000 more than the price of a home that we believed we could afford. The bank would have loaned us a lot more than we were asking for. We bought a house at this lower level rather than at the maximum the bank would loan. If you have to take out the maximum loan to buy your chosen house, then it is too expensive and you can't afford it.
What's the old saying? Never loan money you can't just give away because you probably just gave it away......
Banks are crooks.
as I said above
it' s ok to offer loans to close people in dire need if you never allow yourself to expect to get it back. It has to be given generously like a gift. Americans aren't raised to do that but they do in other countries.
I learned (am glad) that from a N. African friend...aquaintances of his would borrow and loan thousands of dollars and were simply more fluid and generous with money, for whatever the reason (these were all his countrymen living in the US). What's more remarkable about it is these were nonProfessional men...students, cooks, waiters, cabdrivers...not well off people.
Money doesn't buy happiness. I'm a saver. When I make decent money it feels good to loan it when people need it. Too bad I haven't made decent money in a while.
Definition of a co-signor : " An a$$hole with a pen in their hand."
MM............Change that to a DUMMY with a pen in their hand and I will agree!!
No need to use rude language, MM. This writer made a mistake and has generously shared that with others to warn and teach them.
Nothing you could have read should have led you to what you wrote. You are no better than the friend she loaned the money to, in fact you are slime. You a re the very A hole you called the lady.
That's a stupid thing to say...
MM...Pretty mean thing to call someone you don't know. I am sorry for your situation whatever it may be, but taking it out on others is just terrible. She made an error in judgment, I'm sure you have make your share or you wouldn't be so bitter towards others.
C'mon, you guys... Give him a break! MM probably doesn't get out much & he's been waiting all morning for an opportunity to do that clever little dollar sign thing. Of course, MM, you DO know that it spells a naughty word, right?
No good deed goes unpunished. I'm sorry that this happened to you. Unfortunately, it is one lesson that many nice people learn the hard way.
A good reply to a person asking you to co-sign a loan for them is to say, "If you could afford it, you wouldn't need my co-signature on the loan. Perhaps you should look for something more appropriate for your budget so that you can do this on your own."
Why are YOU "sorry"? You had nothing to do with it, did you? Then why are you apologizing? And it didn't "happen to [her]" SHE DID IT TO HERSELF. Stunning stupidity at work.
I think bluemist was saying "I empathize with your misery", not "I feel personally responsible for your screwup."
"I'm sorry" can have several meanings - it is not limited to apologies. Perhaps it would be more easily understood as "I feel sorry for you."
Oh, GeneralEclectic, I don't know whether to laugh or cry at your comment. Let me get this straight... you're berating one stranger (BlueMist) for telling another stranger (the author) "I'm sorry this happened to you"... seriously? Yikes, I'd hate to cross your path when someone did something to you personally--I'm betting that caps lock would never come off.
Moreover, BlueMist's suggestion for a reply to someone asking for a cosigner is fabulous. There is no "Stunning stupidity at work" here, only your own misdirected anger management issues.
One word for GeneralEclectic: Troll
Hey General, the last line of your entry says it all... about YOUR entry, that is! "Stunning stupidity at work"! This court-martial tribunal finds you guilty of gross insensitivity and reduces you in rank to PrivateEclectic! :)
I've found some people...it seems mostly men...think that "sorry" is an ownership of complete guilt
such people
-have trouble apologising
-dont' empathise verbally with the words 'I'm sorry that...
Folks, "I'm sorry" means " I have sorrow", originally ie "I'm sad"
"I'm sad you hurt your foot" "I'm sad you lost your job"
I have sorrow, I comiserate that you hurt your foot or lost your job. Some of us say "I'm sorry for that" . It is a correct usage. You should try it.
Of the four mistakes listed, only the first has any relevance to the problem and preventing similar mistakes in the future.
Your move to L.A., checking your credit score, not having a contract with your friend... none of these have any bearing whatsoever on the decline of your credit and avoiding any or all of them would not have prevented this problem. What would having a contract with your friend do for you? The only thing the bank cares about is your contract with them? And if your friend isn't honoring her contract with the bank, what makes you think she'd honor a contract between the two of you?
This is a good example of bad things happening to good people who are naive enough to think that others would behave as they would in times of difficulty. Sadly, the only mistake and the only lesson is that you should NEVER EVER enter into a binding contract that you yourself are not ready to take on in full.
The challenge, I suspect, is figuring out how to retain your generosity and willingness to help others while better protecting yourself from the more disappointing side of human nature.
The problem is her friend wasn't in any known difficulty. According to the writer, she didn't lose her job or experience any known problems. I suspect she was in well over her head from the start. It is exactly why the bank would not approve her without a co-signer. A $3,000 + monthly mortgage payment along with condo fees indicates that this woman had her head in the clouds. She still hasn't offered any reason for her failure. She was simply unworthy of such an obligation.
I'm with the other person....what would a contract have done. You are still on the hook for the loan and for better or worse you will end up having to pay. Even with the money on the short sale, I'd be willing to bet that you'll still be on the hook to pay whatever the friend doesn't pay. Secondly I'd have to say, you put too much stock in credit. Getting your credit slammed, is probably the best thing that ever happened to you. Made you actually live within your means, learn how to budget, and provide hard learned lessons to your children. This credit mess that the country is in is not going to be solved by this generation, it will be solved by the next.
You nailed it, Brian.
Hit Girl - It might have helped her go after her friend if the bank wants the additional money from a short sale. The bank may go after the co-signer for the balance due on the loan. It might have been smarter for her to have her friend pay her and she pays the mortgage.
By far the smartest thing would have been not to co-sign and to have stayed out of it entirely. Getting involved with the friend paying her and she pays the mortgage just means she goes bankrupt and the friend suffers no consequences other than the loss of friendship.
Suze Orman once gave this advice: If you can afford it, give the person who is asking for help a cash gift, and make it clear that it is a ONE-TIME gift. Because it is a gift, no expectation of payback can mess things up--and because you've made clear it's ONE TIME, you aren't bothered over and over again by the same person.
I had a client who lent $10,000 to another friend because the friend's business was in trouble. She had a contract with the friend. Well, the friend went bankrupt, and that was the end of that, regardless of the contract. However, the contract came in handy when my client was filing her taxes because she had proof of a bad debt loss, which is potentially deductible. It got her a credit of ten cents on the dollar from IRS, but that was better than zero out of the deal.
A contract with her friend would have enabled the writer to take her friend to court to in order to sue her to get the money owed. Other than that the contract would have no value.
Really?... I thought it was common knowledge: Never mix money with family and friends.
so true....I know of someone who took out a loan for a family member who was behind on her bills, promising to pay him every month. She works and has her own family. Then he took a cash advance on a CREDIT CARD for another family member so she wouldn't go to jail. He's lucky to see a payment of any kind from either one of them. I wouldn't put money up for bail for one of my own family members, and boy did I hear about that for a while.
The first clue to the woman in this article should have been that for whatever reason her friend couldn't get the loan on her credit alone. Whether because of excessive debt, too high of loan to income or poor payment history clearly her friend wasn't a good risk. Whether a friend or a family member the same criteria applies, a bad risk for the bank is a bad one for you.
Larry...you make so much sense, if the bank didn't think she was a good enough risk on her own, that should have been a clue.
they were throwing loans at people back in 2007-8 before the crash when the original morgage was signed
that they wanted a cosigner, as some pointed out, is particularly telling given the time period. She must have been a very poor risk to have that happen back then.
the writer must not have known how easy it was to get a morgage back then, at the time. They would have even given me one and believe me, I had a tiny income (but good credit). Can't get one now
What a moron!
Unnecessary. She is sharing her mistake to help others learn.
Opinionated High Horse...I'm sure your one of the nicest, most intelligent people on earth and I am sure you have never made a bad lapse in judgment. When you finish walking on water, we can all agree your anger towards her shows your personal problems boiling over towards a complete stranger.
Well, it had one upside. She got to sell an article about it, which is how she makes her living.
If I were to start writing about all the mistakes I've made, I would have a new full time career!
Ha! three payments for $10,000. Maybe she should have opted for a quarter million dollar home rather than a half million dollar home.
DO NOT co-sign any loans or loan money to friends or family. When my son decided he wanted to buy his first new vehicle, the salesman looks at me and says "would you co-sign for him?" I looked back at him and said, "No, if he can't afford the vehicle he shouldn't buy it." I did assist with a down-payment, but nope, no co-signing for me. He recently bought his second new car (after owning the first for 12 years). I once again assisted with a down payment, but when they came back with his credit application, the salesman looks at him and says, I've never seen anyone your age whose credit rating is as high as yours is. Lesson learned.
Good for you mom! Now he will pass those valuable lessons on to his kids. People may think you're mean for not co-signing, but I don't. I think you did the right thing.
For real estate, even assisting with a down payment can be questioned by the lender - at least it was before the real estate market went wild. I helped my brother with a down payment. The lender was looking closely at his banking records, and they wanted to know where the down payment came from - they wanted to make sure he did not have payment obligations that would conflict/compete with the mortgage.
If you decide to help friends or family, just give them cash. Expect nothing in return, and don't be upset if they spend it on something other than the original plan. It is a gift - just kiss it goodbye and say 'good luck'. If you want to put strings on a gift, put it in a trust.
Wow. That's insane mom. It's your kid, and kids who are responsible enough to pay for the car may not be able to get good rates due to low scores due to no credit.
BUt...your son still didn't have the money for a down payment 12 years later...what DID he learn in those 12 years? To spend every nickel he got his hand s on?
Miss Cooper's Mom..................Yes, more kids need the kind of parental guidance you provided. It seems more and more of the younger generation today has a sense of entitlement.
It is great you helped him with the down payment as that ,many times can lower the monthly payment and make the care affordable.
I agree with Rick. If after 12 years, you can't even make the down payment, something is screwed up.
Rick, may be he had bought a new Ferrari and took 12 years loan with monthly payment equaling his paycheck.
I applaud you!!!!!!!
My parents co-signed on a car loan for me when I was 19 because I was too young to have a credit history. They had asked me to transfer home from an expensive private college to a cheaper local one. In exchange, they would help me get a car so I could get to work and school.
The car was new but inexpensive...the maker's absolute entry level vehicle. The $200/mo payments were automatically drafted from my checking account and I made every single one of them. I drove that car for 11 or 12 years. My parents had taught me how to pay bills, save, and use credit wisely. In a situation like that, I don't see an issue with helping out. Now, if I went to them today and asked they to help me buy a mcmansion, I'd expect them to laugh and tell me to keep dreaming.
In the words of a famous poet " Stupid is a stupid does ". There is a cure for ignorance it is called learning, but there is no cure for stupid.
My b/f co signed for a car early on in our relationship. I messed up once, nearly got the car re-poed, never again. We still have the car and we are still together 5 years after signing the paperwork. And, my mother rarely, hardly ever loaned me money, when she did I always paid her back in a timely manner. I value relationships far too much to screw anyone over because of money.
The point being that your conduct is unusual. Typically, people needing a co-signer are irresponsible with credit. They do not change their behavior simply because someone else is foolish enough to take the risk to help them.
Almost two years ago I made that mistake of co-signing on a car loan for a close relative. So far there have been no problems but now I need a new vehicle. My wife is now out of work so my situation is dramatically different. It sure would be much easier for me if I had not allowed that loan on my credit history...
I don't know NB, I wouldn't call it unusual as much as expected. When a person co-signs, this is the behavior that is expected. Too many people fail and fall down at this, but if it wasn't expected then the co-sign wouldn't occur in the first place.
reaj, you write " I value relationships far too much to screw anyone over because of money." And yet, you say that you screwed up once and the co-signed car was almost repossessed (although, how the car would get repossessed for one missed payment seems a bit far-fetched...). Sounds like you did just what you say you won't!
=D
Well, friends do try to help each other. But even I know who I can trust and who I can not when it comes to friends and family. Mostly because they don't know when to shutup. I know that if I "donate" money to a certain someone, I can easily figure if their going to pay me back, or if their just "talking through their teeth while smiling."
I wish the story teller the best. But hate to say, that many millions of americans, just like you, found out the hard way. Your attempting to save the horses in the barn after the barn has already burned to ashes. To little, to late.
You would do well to "donate" some more money to your education. Your spelling is atrocious.
LOL...who cares if someone spells a word incorrectly as long as they pay their own way in life, maybe you should worry more about your own life and less about how someone spells the word their. I know a few college educated people that can't change a tire on their own car, Education helps a person but it does not make a person.
Marc, either you want attention and figure insulting someone will get your comment noticed or you feel inferior and must put others down to make yourself feel better. Whatever your reason, most people will only pity you, so if pity is your goal, bravo. By the way I am also not an English Major, so you are free to criticize my grammar and spelling.
WHOA! Something VERY major has been left out here: the friend's mortgage payments were around $3000/month! Even around 5% interest and typical escrow, that's about a $450,000 house. That's not just "the leap from renting to homeownership," that's the leap to a "we've finally got our piece of the pie" living! If someone needed a cosigner for a loan, yet wanted to start out in a $450K house, you are an INCREDIBLE fool for cosigning!
Mick, I would tend to agree with you except that houses in NJ in 2008 were astronomical after years of double digit increases. In certain parts of NJ, $450k would get you a roomy townhome at best. No doubt she made a bad decision to buy something that she couldn't afford but I don't think the house was especially extravagant.
What does a small house in New Jersey cost?
And the article said it was a condo.
Price varies according to location, A 1500 sq ft home on Long Beach Island would sell for a lot more than a similar home in the Pinelands, Before the crash you could buy a 1500 sq ft ranch in some areas of the state for 100-150K and in other areas of the state you would pay 2-3-4 times the price for the same identical house. Location...Location...Location
Monitoring your credit report may NOT have helped. Many mortgage (and other credit) companies don't report honestly. They might not report anything late until they are almost ready to take legal action.
When co-signing a loan, it is probably possible to get the lender to send a duplicate copy of all statements to the co-signor. Just write it in the contract when you co-sign. It won't make your idiot friend pay on time, but when you see a late payment you can whip open the checkbook and cover it.
Can't afford to cover the mortgage, insurance, and condo fees for someone else? - then DO NOT co-sign. When you co-sign, you are taking on the full responsibility for the property - you just don't get to enjoy the use of it, nor earn any equity. What a great deal.
Funny how a "FRIEND" thinks nothing of screwing over you in effect using your money credit history as theirs messing it up and walking away like nothing happened. Now you have to clean up the mess. As for family they will really screw over you and if you don't let them they'll talk trash about you and lay the GUILT on heavy and what is more other family members will take their side. My advice don't tell anyone how good your doing cry poor mouth all the time and never ever lend, co-sign, back anyone financially. If you do feel the need to help family consider it a gift and be done with it.
Old Sarge: Consider it a gift and be done with it........I agree. Before I give away anything (money, books, time) I ask myself if I can give it away .......if the answer is yes then I give freely-if the answer is no then the answer is no. My husband and I have worked hard our entire lives to achieve excellent credit ratings and financial stability- not willing to risk losing what has taken a lifetime to gain..........
Sarge, I agree with you completely about not bragging/talking up your income. The trouble often is family's perception of your income, not whatever the reality is. This happens to my husband and me all the time, since we are both nurses. We live in a small house that we rent, I drive a 14 yr old car and we haven't even taken a honeymoon. However, what family *perceives* is that we have a house, he drives a 2011 car and we do the things we want to do without struggling financially - they aren't around for the 50-60 hour workweeks that generate overtime pay to do those things!
I guess sometimes, you just can't win....people are going to be who they are, and think what they will.
3 missed payments = $10,000 ????? WHAT THE KCUF !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
I am sure there were tons of late fees included in that amount.
She must change her last name to Dumass
While the author meant well, this is a cautionary tale about co-signing for anyone else. However, it also highlights the excessive power of credit companies to make life unnecessarily difficult for people. We had a friend whose young son was in the hospital for emergency surgery, generating endless charges. When she and her husband missed ONE payment (because they were swamped and stressed out), they found it almost impossible to get a loan for their house. That one understandable misstep gave them a black mark the credit industry held against them for a long time.
What is the "excessive power" you are talking about? They are basically determining whether you are good enough to borrow THEIR money. It's their jobs to be VERY VERY careful about that. They have almighty, extra ultra super power over deciding who gets to borrow THEIR money. Credit score is just their way of collaborating with each other, so that it's easier to determine that. If you want to lend your money to people with credit score <600, then, by all means, do it. But don't force banks to lend to those irresponsible people.
I played around with P2P lending system, and saw how many people, with credit score between 650 - 750 missed payments or defaults on MY money. I understand how banks should be extra careful.
I'd suggest put a few hundred dollars on P2P lending and, for once, be a lender. Choose who can borrow your money and see how they make their payments. How, when someone made late payment, make you worry that that person may not be able to repay your money. It gives you some insight why credit score seems too harsh in some case, and you can feel how banks feel.
She got what she desreved. Her approach to cosigning was rather cavalier and didn't show any concern.
YOUR LIVE----AND YOU LEARN......Life is is based on experiencing the bad and the good, its a lesson learn.
Sorry to see this happen to you. I will never ever ever ever cosign any thing for anyone. For that reason. You never know what could happen. The other person could have good intentions. But the what IF comes in to play. For some unforeseen circumstance like a serious illness like cancer with no insurance or even life insurance. A 20 year job suddenly ends, Auto accident with a liability law suit. A divorce on their end, any thing can happen. All these things can happen to you, so why double you risk by adding someone else to the equitation.
Doug I agree with you. We all must take care of our OWN issues in life first, then family then friends. If a friendship must end because the "friend" insists that you lend him/her a ton of money for any reason THAT YOU DO NOT HAVE AS A BACK UP, it is time to let this "friend" out of your life, permanently. Move on. In the cases of a family member, it is a lot more difficult because you cannot simply say "piss off" and walk away from a person that is related to you.
We have a 19-yr-old daughter. Her previous car was costing her hundreds (of her own $$) to repair & it was draining her savings account. My husband & I thought long & hard about co-signing. We did. She goes to school, works, does anything she can to not carry student loans & refuses to use credit cards.
She will need credit history. In fact they did run her credit report to try to carry the loan herself but of course she was denied due to no credit history! We have no regrets. She is so thankful for that silly used car she makes the payments ahead of time.
In our 27 years of marriage she is the first & only person we will ever co-sign for. Now if she asks us to co-sign on a house the answer would be a loud "hell no!".
She lent her best friend of 13 years a measly $200 & she's having to deal w/not having that paid back when the friend plasters on facebook "got a raise at work, moving again, got a new dog"..on & on. This $200 was to pay a bill. So she got burned. She didn't like the feeling.
Rule #1- NEVER co-sign for anyone (not even yourself) unless you can afford to carry the entire burden yourself and you are okay with having to. Should you be in a position to co-sign for someone and decide to, then you need to assume the worst (that they will default completely and leave you with the balance).
Rule #2- Do not take out any line of credit or loan unless you absolutely need to. There are so many people out there who treat credit like a freebie hand out- they go splurge and then spend ten years and three to ten times the amount of what they originally purchased to pay it off due to interest and fees.
When you still have student loans, you should never co-sign anything. Pay off the student loans.
I noticed that, too! What the author didn't realize was that as co-signer, you are making a promise to pay, just as though it is your own loan. So the question then becomes, why was she trying to be so "helpful"? It's one thing to love your friends and family, but another to jump into a sinking boat with them...