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Should You Co-Sign that Loan?

One of the more interesting items I read recently on CNN Money had to do with a new trend: Looking for co-signers on Craigslist [3]. Co-signing a loan is a big enough risk without adding in the potential for getting scammed by a stranger over the Internet.

There are a lot of a reasons you shouldn’t co-sign, though. And if you want to make a profit from someone by helping them get a loan, you might be better off using other options, such as P2P lending.

Problems with Co-Signing for Someone You Find through Classifieds

Borrowers looking for co-signers on Classifieds sites like Craigslist actually offer money to those who are co-signing the loan. You might be offered $500 in cash to co-sign on a loan for $3,000. You get a little cash in your pocket, and the borrower is approved for a loan that he or she wouldn’t be able to get on the strength of his or her credit.

Right off, you can see that there are problems:

Choosing to co-sign a loan is a heavy responsibility, whether you know the person or not. And it can affect your credit, as well as your ability to get your own loan in the future. Your best bet is to always avoid co-signing [5].

P2P Lending Instead

While it might be tempting to enter into a co-signing agreement with someone, you might be better off using P2P lending [6]. With this process, you can be the lender, rather than a co-signer. You can help others get the loans they are looking for, and earn money, since you are paid interest. You can start with as little as $25, and you don’t need to put your credit at risk.

If you are looking for a way to earn money while helping others get loans, P2P lending is a much safer choice than co-signing.

(Photo: aflcio [7])