Updated: Nov 20, 2021
by Gary Montgomery
It may seem rather harmless at the time when a friend asks you to sign a note to help get them a new car. It’s not really my debt, is it? I mean, what are the chances that my friend/family member will be unable to make their payments?
Actually, the chances are very real, which is why the lender is asking you to sign the loan in the first place. A Federal Trade Commission study found that 50 percent of those who cosigned for bank loans ended up making the payments. And 75 percent of those who cosigned for finance company loans ended up making the payments!
Anytime you cosign, you become legally responsible for the debt of another. It’s just as if you went to the bank, borrowed the money, and gave it to your friend or relative who is asking you to cosign. In effect, you promise to pay back the entire amount if the borrower does not.
And while you may mean well, the Bible maintains a very clear stance on cosigning. Proverbs 17:18 says,
“It is poor judgment to countersign another’s note, to become responsible for his debts” (NLT).
Debt presumes tomorrow. It presumes that tomorrow the borrower is still going to have a good job. It presumes that a business is going to be able stay afloat in perilous times. It presumes that your friend/family member is not going to get sick or injured and be unable to work for a period of time.
So, while cosigning may masquerade as a kind gesture, it could end up causing financial hardship to the cosigner in a several ways. First, you may become liable for the entire debt. And while some may be able to weather that storm, it may come with a price. You may not be able to take that trip you had been planning or it may delay starting a business.
Secondly, it is a financial peril that may negatively impact your ability to make a purchase. Perhaps it is your dream home. The one you’ve been waiting to come on the market. You see a ‘For Sale” sign out front. You call the realtor. You make an offer, and it is accepted! Then the lender runs a credit report, and it says you have a car loan that is delinquent. Yes, it’s the car that you cosigned the loan on for a friend you haven’t seen in months.
Sadly, it may cause challenges in the loan process, but it also may cause irreparable damage in your relationship with your friend/family member. And that’s the damage that distresses our Heavenly Father the most.
So, what should we do if we have already cosigned for a loan, the Scripture has counsel for you, too. Get out of it as fast as you can!
Proverbs 6:1-5 says, “Son, if you endorse a note for someone you hardly know, guaranteeing his debt, you are in serious trouble. You may have trapped yourself by your agreement. Quick! Get out of it if you possibly can! Swallow your pride; don’t let embarrassment stand in the way. Go and beg to have your name erased. Don’t put it off . . . If you can get out of this trap you have saved yourself like a deer that escapes from a hunter, or a bird from the net” (TLB).
Be encouraged. Watch this short testimony of a couple that cosigned a note that went bad and how the Lord led them out of it. - https://vimeo.com/548971009
To learn more about handling money God’s way, go to www.compass1.org. There you will find great resources, videos and financial calculators that may help you on your faith & finance journey. To receive a free download of Howard Dayton’s book “Your Money Counts”, go to www.compassebooks.org and create a login. It’s a fun read and gives direction for spending, saving, giving, investing and getting out of debt.