From US News & World Report via Yahoo Finance:
The advice for cosigning a loan for a family member or friend is always virtually the same: Don't do it, and if you do, understand the consequences if something goes wrong. Read more
But what if you ignore the advice and cosign, and the loan goes south for reasons beyond your control?
Although there is no database that tracks cosigned loans, anecdotal evidence and some data suggest cosigning is common - and it isn't always parents cosigning for children. In 2010, LeaseTrader.com, a national car leasing marketplace, reported a 29 percent increase over the previous two years in the number of parents asking their kids to cosign a car loan for them.
So what happens if you've tried to help a loved one, and that loved one can't keep up with the payments, so you're stuck paying for his or her credit cards, student loans, car or even house? Or perhaps you also can't pay, and you're watching your once-sparkling credit score crash and burn. Maybe the situation is even worse, and your family member or friend won't make the payments. What then? Are you stuck paying off the loan, or is there an exit plan?
The answer to both parts of the question is yes. Neither situation is pretty, but if your goal is to simply extract yourself from the predicament, here are some of your options.