This is a good question because when Co-Signing a Loan, the debts are all yours irrespective of what you are and your friend agreed upon. So, to stay protected ensure to use these following tips.
- You need to talk with your friends and ensure that they have the right mindset. Explain to them that you will only help them when they provide you with any security so that if they default any payment, you can make the payment using the security provided.
- Affordability is another important thing you need to consider to protect yourself. You need to ensure that you are capable of making the payments if they default and you take them over. Know the principal amount as well as the monthly repayments clearly.
- Since you are the co-signer of the loan, you need to have monthly instalments. You must also ask for a letter demanding the penalties and interest so that if they fail to make repayments for the last 3 months you are aware of it.
- Asking for security may sound harsh, but it is important as you are willing to pay off the debts if your friend fails and for this you need collateral. You must ask your friend to transfer some of the assets and investments in your name before taking the loan.