It’s no secret that Mike and I are Dave Ramsey fans. I often enjoy listening to Dave’s talk radio show online when I get a chance- he takes a ton of calls from people in various financial quandries and you get to see how his advice applies to various real life situations.
One of the pieces of advice that Dave regularly gives is this: do not co-sign loans. It’s not that he thinks it’s a sin or something. It’s just that in his years of financial advising he has seen so many families and friendships ripped apart because someone co-signed for someone else who didn’t have money, and then the person without money didn’t pay back the loan and suddenly the co-signer is on the hook.
My mom actually has always refused to co-sign loans- like the loan I stupidly wanted to get so I could buy a brand new car as a teenager…thank God that didn’t happen! She even refused to co-sign for a college loan. Her reason was that her dad always taught her not to co-sign because somewhere in the family tree there was a big blow-out over a defaulted loan that had been co-signed on. I was always pretty annoyed with her and her clearly archaic logic.
And then I grew up and learned a few things and got to thinking…maybe mom was right??
1 My son, if you have put up security for your neighbor,
if you have shaken hands in pledge for a stranger,
2 you have been trapped by what you said,
ensnared by the words of your mouth.
3 So do this, my son, to free yourself,
since you have fallen into your neighbor’s hands:
Go—to the point of exhaustion—[a]
and give your neighbor no rest!
4 Allow no sleep to your eyes,
no slumber to your eyelids.
5 Free yourself, like a gazelle from the hand of the hunter,
like a bird from the snare of the fowler.
15 Whoever puts up security for a stranger will surely suffer,
but whoever refuses to shake hands in pledge is safe.
It’s not that I think these Proverbs mean that it’s a sin or evil to co-sign. But I do think clearly say that it is probably not wise to co-sign (or on the flip side, to be the one who is co-signed for and is getting into debt!!) It just sets yourself for potential trouble, both monetary and relationally.
And think about it: the reason a bank would ask someone to get a person to co-sign on a loan is because they don’t think the person will be able to actually follow through and pay the loan! These are financial experts who have mathematically figured out what the liklihood is that a particular person will be able to pay back a loan, and the prognosis is not good if someone needs a co-signer. It has nothing to do with character or willingness to pay back the loan. It’s just plain old math (actually, it’s probably more like really complicated actuarial science…)
At any rate, it’s worth taking several thoughts about before doing.
And on the flip side- Proverbs also says in 3:27-28 to not withold a good thing from someone if it is in your power to give it. Debt is probably not a good thing to give someone, but if you have the power to help someone that you really believe in do something that they really believe in, perhaps you could bless that person with an outright gift- no expectations attached.
As for us- we are taking the advice above in Proverbs 6:5 to “Free yourself, like a gazelle from the hand of the hunter.” Aka- we’re running fast from the clutches of debt!
How about you? Have you ever had any experience with co-signing loans, ether is signer or signee? What’s your policy about giving when friends and family need help, especially if it involves debt? I know it’s not always a cut-and-dry situation, but these Proverbs certainly give you food for thought concerning debt!
Read more Truth About Money here!