As children get older their requests become more adult as well including asking you to co-sign for a loan or possibly a rental agreement. It's all part of life in this dreary economy and young people just starting out are having as hard a time at finding meaningful employment as anyone.
You first had to deal with the co-signing issue when they were in college and wanted a credit or debit card. Most students under 21 can't get one without an adult co-signing.
Then when they graduate and want to go off on their own, they haven't lived long enough to create a credit history let alone get a well-paying job, so they may hit you up to co-sign or help with the rent on their first apartment.
Then come the loans. Even when they can get them on their own, the rates they qualify for may be prohibitively high. So you have to decide whether to offer your signature to guarantee your child will pay it back and if they don't you will.
Before you sign on the dotted line, consider this. The Federal Trade Commission estimates that three out of four co-signers are asked to repay loans because the primary borrower has defaulted. Ouch.
Now what do you do? Should you sign knowing there's a good chance you'll end up paying if off? Here, according to Money magazine, are some things you should consider and steps you should take.
First, find out why your child is required to have a co-signer. Then ask the same questions the lender or landlord will: Can your kid afford this obligation? How much of his or her pay will it represent? How does he or she plan to cover the bills if he or she loses a job?
Second, before co-signing a credit card agreement, know how your child will use the plastic. For an apartment lease, consider whether your kid can control his friends because you'll be responsible for damages if a party gets out of hand.
Third, forget the notion that you're secondary when you co-sign: Creditors and landlords will come after you if your child fails to pay the bills. So don't agree unless you can afford the payments yourself.
Fourth, FICO credit scoring treats credit card, car loan co- borrowers no differently than primary account holders. That means your score could dip if your child is delinquent and defaults.
If you were planning to apply for credit soon yourself, you could be denied because a co-signed loan is reported as outstanding debt on your credit file, impacting your ability to borrow.
If you do decide to co-sign, take precautions to curtail losses. Make sure the limit on your child's credit card stays low, such as $500 to $1,000.
On a lease, get the parents of your child's roommates to co-sign with you. That way, it's less likely you'll have to foot the bill for someone else's kid.
If you're helping your child borrow for a car, put the title in both your names. That way if he stops paying, you can sell the car to pay off the debt.