Is it wise to be a guarantor?

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IS IT WISE TO BE A GUARANTOR

“My child, if you have put up security for a friend’s debt or agreed to guarantee the debt of a stranger… follow my advice and save yourself, for you have placed yourself at your friend’s mercy” (Proverbs 6:1, 3 NLT).

I remember speaking to someone who had agreed to be a co-signer so that their friend would qualify to buy a new car, but they didn’t realize that once they did this they would be responsible for a loan.

Throughout the course of time, this person’s friend had problems and was unable to pay the car. The bank took the vehicle and both of their credit was ruined. Plus, the co-signer was in debt with a few thousand dollars.

Why do you think the bank or furniture company doesn’t give individuals credit without a co-signer? It is because they have already checked their history, and they know that it’s very likely for that person not to be able to pay off what their getting, therefore, they want to ensure their money. If the bank doesn’t believe you’ll pay them back, what makes you think that you will?

It is better to look for different ways to help people, to be prudent and not get tangled into difficulties that will ruin good friendships, affect your finances and your family.

If it’s possible, help others by guiding them to take the financial classes at church. They will learn the three basic steps to have order and success in their financial life, such as: how to use a budget, how to build an emergency fund and how to eliminate debts with the snowball technique. The Bible advices everyone to use wisdom and not to be guarantors in other words a “co-signer”.

“My child, if you have put up security for a friend’s debt or agreed to guarantee the debt of a stranger— if you have trapped yourself by your agreement and are caught by what you said— follow my advice and save yourself, for you have placed yourself at your friend’s mercy. Now swallow your pride; go and beg to have your name erased. Don’t put it off; do it now! Don’t rest until you do. Save yourself like a gazelle escaping from a hunter, like a bird fleeing from a net” (Proverbs 6:1-5 NLT).

Think about it:

In what other areas is it possible to have “co-signing” issues?
What can you do to improve your financial state?