Agreements are rarely sealed with a handshake these days. Most companies, from housing management to car dealerships, want proof of good credit first. If someone close to you in Ohio doesn't have it, they may come to you to ask you to co-sign the agreement. When you co-sign, you're essentially agreeing to take over the financial responsibility in the event the borrower can't make his payments. In fact, the Federal Trade Commission warns that as many as three out of four co-signers wind up paying.
Signing Your Name
When you sign your name as co-signer in Ohio, you're in effect becoming a potential borrower as well, says the Federal Trade Commission. If the person who asked for your help can't make his payments, you're legally responsible for making them. Because of this, you should only sign your name on the dotted line if you can afford the financial burden, if it should ever fall to your shoulders. Also, signing your name can have an effect on you even if the person never defaults, because future lenders will see that you co-signed a loan and will consider it as your financial obligation. You may be turned down for loans if lenders feel you've overextended yourself.
When the Borrower Defaults
Let's say the original borrower had all the best intentions in the world, but she lost her job and can no longer afford payments on the car loan you co-signed on. The loan company has the legal right in Ohio to actively pursue you for the payments. According to the Federal Trade Commission, this means the company can sue you and have a judgment decided against you in court, which has a devastating impact on your credit report. It can also force you to reveal your assets and even make you sell them to settle the debt.
If you've co-signed a property loan in Ohio, such as for a car, home or apartment, you'll have no legal right to take over the property or sell it unless your name is on two pieces of paper: the loan and the property title. Having your name on the title means you can decide to take the item as your own when the borrower defaults or sell it to pay off the debt, says Lawyers.com.
Your credit and your savings are on the line when you act as a co-signer in Ohio. If the borrower defaults and the creditor turns to you for money, it's wise to set up a partial payment arrangement, advises Lawyers.com. Creditors would rather have something now than an uncertain amount later on. However, settling a debt rather than paying it off in full can hurt your credit, so stipulate that your credit must remain clean as a part of the bargain. In the meanwhile, you should also set up arrangements for the borrower to repay you the amount you're going into debt. Create a promissory note that outlines what she owes you and how she'll repay you.