What do you say to a friend or co-worker who asks you to be surety - to co-sign a loan? You don't want to offend your friend or co-worker. But do you just give in and say yes, thinking it's a low risk anyway?
Based on principles of good financial stewardship, the answer is No, Do not co-sign or co-make loans. Why? Here are three quick reasons: (1) You don't know if you'll really be helping your friend. If he's not managing his finances properly, he may already be in a big hole, and helping him make a loan may simply enable him to dig himself into a bigger and deeper hole. (2). Your priority is your immediate family, and providing for them. If you're married, this means your wife and children. If you're single, this means your father and mother. If you're extending yourself by co-signing a loan, you could end up in a situation where you are paying for the need or whim or a friend at the expense of your immediate family. And even yourself. (3) There may be other parties with a greater need, whom you can help. A missions organization, a local charity, relatives who are truly in need, etc. Having available resources will put you in a position to help when you see the need.
So what do you say to someone who casually asks you to co-sign a loan? Here are three approaches:
A. Offer to provide advise instead. Ask if he is willing for you to give you information - ask how the loan will be used, what is the long term value of the item to be purchased, what is his ability to pay, what is the immediate and practical benefit of the purchase, whether he can postpone gratifying his purchase ambition to save instead and purchase with cash. Many times, loans are about immediate gratification of a want, and not based on a true need. It can reflect an unwillingness to labor first and endure saving. Your friend may reconsider his loan application after you give advise.
B. Offer to give a small personal loan instead. Rather than co-signing for a large amount that he will say is "not a risk at all since he will pay for it completely", offer to loan him an amount that you will be willing to give him totally and wouldn't mind at all if he doesn't pay you back. Or, if he is willing, have him turn over to you collateral that you know is worth something, then give a bigger loan with the express understanding (or written, depending on how much you trust your friend) that if the loan is unpaid, you will have ownership of the collateral item. This may be an expensive digital SLR, or genuine jewelry. A friend with a true need and a plan to pay back will appreciate this gesture. Others may turn aside from this option and seek another co-signor instead.
C. If your friend is insistent after the first two approaches, then simply say that as a matter of principle - you don't co-sign loans. You can even say that your Financial Advise (me, or even better - God's Word) doesn't allow you to co-sign loans. Or you can say directly - "the Bible asks me not to co-sign loans". This is a fact. And people will back away after you say this.
Here are the verses from the Bible, so you can cite them.
My son, if you have put up security for your neighbor, if you have shaken hands in pledge for a stranger,
So do this, my son, to free yourself, since you have fallen into your neighbor’s hands: Go—to the point of exhaustion— and give your neighbor no rest! Allow no sleep to your eyes, no slumber to your eyelids. Free yourself, like a gazelle from the hand of the hunter, like a bird from the snare of the fowler. (Proverbs 6:1, 3-5 NIV)
Whoever puts up security for a stranger will surely suffer, but whoever refuses to shake hands in pledge is safe. (Proverbs 11:15 NIV)
One who has no sense shakes hands in pledge and puts up security for a neighbor. (Proverbs 17:18 NIV)
Do not be one who shakes hands in pledge or puts up security for debts; if you lack the means to pay, your very bed will be snatched from under you. (Proverbs 22:26-27 NIV)
Wise words from the Bible.
Truly - the Bible offers excellent advise for living, today.
Read the book of Proverbs in the Bible. There's one chapter for every day of the month. Read it over and over and gain lots of good insights for business, corporate life, university life or home life.
That's it for now.
Please leave a comment if this has helped you!
Related post: How to keep your cash your own. Don't co-sign loans!
- Posted using BlogPress from my iPad
Based on principles of good financial stewardship, the answer is No, Do not co-sign or co-make loans. Why? Here are three quick reasons: (1) You don't know if you'll really be helping your friend. If he's not managing his finances properly, he may already be in a big hole, and helping him make a loan may simply enable him to dig himself into a bigger and deeper hole. (2). Your priority is your immediate family, and providing for them. If you're married, this means your wife and children. If you're single, this means your father and mother. If you're extending yourself by co-signing a loan, you could end up in a situation where you are paying for the need or whim or a friend at the expense of your immediate family. And even yourself. (3) There may be other parties with a greater need, whom you can help. A missions organization, a local charity, relatives who are truly in need, etc. Having available resources will put you in a position to help when you see the need.
So what do you say to someone who casually asks you to co-sign a loan? Here are three approaches:
A. Offer to provide advise instead. Ask if he is willing for you to give you information - ask how the loan will be used, what is the long term value of the item to be purchased, what is his ability to pay, what is the immediate and practical benefit of the purchase, whether he can postpone gratifying his purchase ambition to save instead and purchase with cash. Many times, loans are about immediate gratification of a want, and not based on a true need. It can reflect an unwillingness to labor first and endure saving. Your friend may reconsider his loan application after you give advise.
B. Offer to give a small personal loan instead. Rather than co-signing for a large amount that he will say is "not a risk at all since he will pay for it completely", offer to loan him an amount that you will be willing to give him totally and wouldn't mind at all if he doesn't pay you back. Or, if he is willing, have him turn over to you collateral that you know is worth something, then give a bigger loan with the express understanding (or written, depending on how much you trust your friend) that if the loan is unpaid, you will have ownership of the collateral item. This may be an expensive digital SLR, or genuine jewelry. A friend with a true need and a plan to pay back will appreciate this gesture. Others may turn aside from this option and seek another co-signor instead.
C. If your friend is insistent after the first two approaches, then simply say that as a matter of principle - you don't co-sign loans. You can even say that your Financial Advise (me, or even better - God's Word) doesn't allow you to co-sign loans. Or you can say directly - "the Bible asks me not to co-sign loans". This is a fact. And people will back away after you say this.
Here are the verses from the Bible, so you can cite them.
My son, if you have put up security for your neighbor, if you have shaken hands in pledge for a stranger,
So do this, my son, to free yourself, since you have fallen into your neighbor’s hands: Go—to the point of exhaustion— and give your neighbor no rest! Allow no sleep to your eyes, no slumber to your eyelids. Free yourself, like a gazelle from the hand of the hunter, like a bird from the snare of the fowler. (Proverbs 6:1, 3-5 NIV)
Whoever puts up security for a stranger will surely suffer, but whoever refuses to shake hands in pledge is safe. (Proverbs 11:15 NIV)
One who has no sense shakes hands in pledge and puts up security for a neighbor. (Proverbs 17:18 NIV)
Do not be one who shakes hands in pledge or puts up security for debts; if you lack the means to pay, your very bed will be snatched from under you. (Proverbs 22:26-27 NIV)
Wise words from the Bible.
Truly - the Bible offers excellent advise for living, today.
Read the book of Proverbs in the Bible. There's one chapter for every day of the month. Read it over and over and gain lots of good insights for business, corporate life, university life or home life.
That's it for now.
Please leave a comment if this has helped you!
Related post: How to keep your cash your own. Don't co-sign loans!
- Posted using BlogPress from my iPad
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