Love doesn't always = LOAN: How cosigning a loan impacts both signers

As parents, it's second nature to want to do anything in the world to help your child. That kind of love doesn't end when they become adults, either. Here are some tips to navigate the financial requests and responsibilities that often arise as adult children venture out on their own.

1. Understanding what a cosigner's responsibility entails - Simply put, if you cosign on a loan then you are guaranteeing that loan will be repaid. If it's not repaid by the primary borrower (in this case your adult child), then you must make those monthly payments yourself. If you are unable to do so and default on the loan, that could have very negative consequences for your credit score, impacting your ability to borrow for other purposes.
2. Be realistic about your child's ability to repay - What type of loan are you cosigning? If it's a student loan and your child is committed to earning their degree and finding a good job, then they should be able to repay the loan on their own after graduation. Understand how long they'll have before repayment begins, what options are available if they can't immediately repay, and whether you could temporarily handle those payments without putting yourself in a cash crunch.
3. Know when to say no - If the primary borrower is not currently employed and is not pursuing a degree program or attending trade school to develop their job skills, it may not be the right time to co-sign on that dotted line. Have a frank discussion about how they intend to repay the loan and how those funds would be used. If reliable transportation is needed to get to a steady job, are there other, lower-cost options that would be sufficient? In this scenario, paying cash for a used car may make more sense than taking out a big loan for a brand-new ride.

Love means being there for your family members, but it also requires having open and honest conversations. Don't rush to say yes before you take time to look at the bigger picture for both yourself and your loved one.