Tuesday's Tip!

Co-Signing a Loan for Your Kids?

The next couple of weeks I will be tackling some issues that have to do with your kids either graduating from high school and/or college.  I myself have a son this age and so it obviously get's me thinking about things that apply to my own life.  However, I would be silly to think that many of you are not dealing with some of these issues as well.

So your kid is getting ready to go to college or is just perhaps in need of a new vehicle.  Let's face it, cars are really expensive these days, even a good used one.  Finding a good used car is a feat in itself.  When I was in high school you could easily find a good used car for around $2,500.  Nowadays I would say it's closer to $6,000-8,000.

Most kids are not going to have this kind of cash saved so a loan is usually inevitable.  The problem is that most kids are not going to have much credit to apply for a loan.  My advice and most others would be to not sign on a loan for them.  As much as this sounds like being a bad parent, trust me you are doing them a favor.

By putting your name on a loan you are just as responsible as they are for this loan.  I would venture to say there have been a lot of folks burned by this.  Your credit will be ruined if they default on the loan and then you'll still have to pay off a loan on a car that the bank took back.  Not too mention the stress that this will cause on your relationship.  

My advice would be to get them a secured credit card and get their credit established.  In the meantime let them drive a beater or even one of your family vehicles until they have enough saved to get their own.  It could save your relationship down the line!