Being asked to co-sign a loan is terrible situation. It’s an easy way to get yourself into debt should they fail to make payments and very difficult to say no to.

There’s usually a reason financial institutions ask for a co-signer – and that’s because there’s a chance the person getting the loan might not be able to pay it off. Quite often people are asked to get a co-signer because they have bad credit to begin with, or are considered a lending risk.

When you’re asked to co-sign a loan, think long and hard about your answer. It’s a serious matter with huge ramifications to you, should the loan not get paid. Don’t say yes just because you feel guilty saying no or are too embarrassed to decline. Before you agree, find out:

• What the loan is for
• If they can realistically pay it off
• How long it’s going to take them to pay it off

And finally:

If they fail to pay the loan – are you prepared to pay it off yourself?

After a relationship breaks up or a friendship turns sour the loan remains in your name, so this isn’t a commitment to take lightly. Only co-sign a loan if you trust the person and know that it’s a realistic loan they can pay off. It’s a big responsibility that could land you in serious debt if it’s gone into haphazardly. If you’re not satisfied with the situation, just say no.