Cosigned Loans Hazards

1. Dynamics Behind Them
AHaller

2. Done as a gesture of
goodwill and confidence
loan will be repaid
Done as one has a need that
one’s financial history does
not support
 Cooperation of the
Guarantor
 Cooperation of the
Loanee

3. Done as a gesture of
goodwill and confidence
loan will be repaid
Done as one has a need that
one’s financial history does
not support
 Guarantor: Vulnerable
 How do you enforce the
agreement?
 Cannot use a “hit man”
 Reliance solely on goodwill
that can evaporate
 Loanee: In Strong Position.
 Motivators
◦ Credit rating (which was
poor to begin)
◦ Moral obligation to
perform
 In case of default they get the
use of service without paying
for it.
 They always can get another
friend or make one a distant
relative

6. YES! 80% of
the time

7.  They must pay!
 By the time they are aware
significant interest and late fees have
accumulated $$$$$$
 If fortunate they can try to negotiate
a settled price with the party that
made the loan
 Outcomes of nonpayment mean
wrecking of credit history
◦ No car loan
◦ No home loan
◦ Affects rentals
◦ Affects acquiring future credit cards
◦ Loss of friend or relative

8. Dynamics Behind Them
AHaller