#098 Cosigning for a Loan, Good Idea?

Applying for loans has become a common financial decision for most of society over the the last 30 years or so.  There are so many things banks and other industries look at when assessing risk of a given borrower including income and a credit profile. Having no credit or bad credit makes borrowing a nightmare. Either the loan could be very expensive due to high interest or you may not be offered the loan at all. One option that a borrower (and the sales person by the way) is to have a co-signer on the loan. In this episode the Talk Wealth to Me gang discuss the many pitfalls and benefits that come with it. Is it a good idea? Join us and decide for yourself.

Transcript

Speaker 1 0:06

[inaudible] Welcome to Talk Wealth To Me, a safe space podcast, where we chat about anything and everything related to personal finance. The information contained in this podcast is for educational and entertainment purposes only. It does not constitute as accounting, legal tax or other professional advice.

Chase Peckham 0:32

Hello, and welcome to another edition of Talk wealth to me, Phil congratulations again on the new house, man. I'm so happy for you.

Felipe Arevalo 0:39

Thank you. I appreciate it. It's it's great. And it's something where it's cool that my kids get to put all those stickers you see on the wall behind me. And I don't have to worry about them messing it up, or I have to fix it myself.

Chase Peckham 0:50

Yeah, that's true. And, uh, you know, when you guys got your house, I'm sure, uh, you and your wife co-signed for that mortgage, right?

Felipe Arevalo 0:59

We did. Yeah.

Chase Peckham 1:00

Well, that's a conversation we're going to have today because so many of the questions that we get on a daily basis is about co-signing and how that affects their credit. And should they do it? And I need to get a car, but I can't afford it, but I want, you know, I, I can't get a, co-signer my boyfriend, I love him. My girlfriend, I love her. Should I co-sign for this man. Where do we begin?

Felipe Arevalo 1:26

Right. You hear those stories and then you're like, well, we're going to be together forever. So let's do it swipe in, saved the day co-sign and hopefully that works out. But you know, there are some risks that go along with it and it's important to know what you're signing up for.

Chase Peckham 1:48

Well, yes. And, and so for, just to give you an idea, I mean, co-signing is when you are going to purchase something typically of a larger amount and you can't, or don't want to, uh, take on the loan on your own. Uh, and a lot of times people will co-sign or ask for a co-signer because they may not, uh, get approved on their own volition, whether that's income related, whether their credit's poor, there's a number of reasons why you might not be able to retain a loan. And there are, when you go to, for instance, just to give you an idea, if you're going to buy a home, uh, living in Southern California on the coast, it's it can be very expensive to buy a home. It's expensive to buy a home anywhere right in the U.S. But you may not be able. I know that I wouldn't have been able to, uh, get the loan for the house that my wife and I are currently in, unless both of our incomes and both of our credit ratings were looked at and in the situation, in which case we are co-owners and co-signers.

Felipe Arevalo 2:51

Right.

Chase Peckham 2:51

Of the home, but that's not always, but there's so many different ways that people can do that. We're married. It's something that we're getting into together. You're married, that's something you're getting into together, but there are a lot of people that just want to make that big purchase and they'll take on the co-signer.

Felipe Arevalo 3:09

Yeah. What about those couples who are not married? And they want to purchase a home who may or may not be thinking about marriage, but they hear that the market's great or they get excited. Like I've always wanted to be a homeowner committed long-term relationship type thing, and then they jump into it. And then, you know, or, or people who aren't even on that stage where, you know, they're trying to get to there maybe. And maybe one part of the, you know, one half of the couple is trying to help the other one bring up their credit so that when they do get married, they can go buy that house.

Chase Peckham 3:44

Right.

Felipe Arevalo 3:44

And let me help you get this car loan, or let me help you get this credit card, or let me help you get this or that. And because together we're going to purchase a home down the road and you hope it works out, but there is that inherent risk that, that goes along with lending your credit.

Chase Peckham 4:03

Yeah. It's so, so dangerous. I mean, we've seen so many different scenarios, uh, through the years of people that have both thrived because of a co-signer and been absolutely burned by it.

Felipe Arevalo 4:17

Right.

Chase Peckham 4:17

And one of the ways of somebody establishing credit is when they go to get credit. So they might have, let's say for instance, a parent, um, and a kid who, where the child is trying to establish credit, uh, their younger 18, whatever it might be. And the parent can co-sign for a vehicle because that kid, that child doesn't have, maybe it has a smaller income, they have a smaller income. The parent has an established income and established credit score. So they co-sign. And then that is a loan as a co-signer that, that, that kid is now responsible for that loan. So that can help really propel their, their credit, uh, that can build.

Felipe Arevalo 4:55

I mean that's how I got my first credit card.

Chase Peckham 4:55

Responsibility. There's a lot of ways, Right. Oh, really? That's the way you got your credit card.

Felipe Arevalo 4:59

Yeah. I got my first credit card. My dad co-signed for me. And he walked down and said, don't mess up my credit. And then he left,

Chase Peckham 5:05

Good for him.

Felipe Arevalo 5:05

Uh, that was his way of, of teaching me. And I, I bring this story up during our credit presentations. It took me about five minutes to make my first bad credit decision, you know, because that first credit card was at Circuit City. And that's how long it took to get back to car audio, um, where I bought too much stuff.

Chase Peckham 5:24

Oh boy. Yeah. Well, again, and so that, that's the danger, right? You're your dad co-sign so you could establish credit so you could get that thing that you want to do.

Felipe Arevalo 5:32

Right.

Chase Peckham 5:33

And when it comes to paying it back, even though the co-signer may not own all that car, stereos, it may not own the stuff that you bought, your making the payments or not making the payments in certain situations, but that co-signer your father. There is just as responsible for that monthly payment as you are, whether there was an agreement and a handshake and a wink or whatever it might be between the two of you. And just part of co-signing, you are taking responsibility that that payment gets made on a monthly basis

Felipe Arevalo 6:04

On time, right? Yeah. It's something where, you know, he was putting his credit on the line. I didn't mess it up. I may have carried a balance a little longer than he would have. I mean, I definitely carried a balance longer than he would have because he's that old school don't carry a balance. But if I made the payments on time, eventually paid it off. And before I was done paying it off, you get the offers in the mail because all of a sudden I had credit history.

Chase Peckham 6:28

You established it.

Felipe Arevalo 6:29

Right. And then I was able to go off and running on my own Circuit City, eventually closed and, and the card, uh, got closed down as well. So he's no longer on the hook for my car audio that I don't purchase anymore. And that's a good thing.

Chase Peckham 6:43

But it's something where yeah, exactly. It would be bad if he was still on there, but it's something where, you know, it was the starting point. If I had gotten, I got declined before that. So it gave me that first little push in the, in the credit world, and then it, then I was off and running, um, but Good or bad. Right. But you had established credit and eventually the long run, you know, you eventually bought a home with, with your wife, which is phenomenal because you know, home ownership, there's great pride in that. And, uh, the interesting thing is, is there are so many people that we run into, uh, where there'll be in love and, and the stories that we hear over and over again, you know, is I was in love my future husband or my boyfriend at the time, or my girlfriend, whatever it might be. They were, they, they didn't have a car. They were struggling to get to work. And I loved him. And so I gave him, I co-signed on the car loan.

Felipe Arevalo 7:41

Saved the day. Right?

Chase Peckham 7:42

And yes, and then they go on and then he's going to cover it. And he promises and all of this stuff, and then they break up and all of a sudden he decides he can't afford the car anymore.

Felipe Arevalo 7:54

Or doesn't want it because it reminds them of you.

Chase Peckham 7:55

Or doesn't want it, or, yeah. Right. Whatever stupid reason it might be. You're right. And then all of a sudden, you're getting phone calls from the creditor saying, Hey, you, co-signed on this car loan, this, they haven't made the payment in two months. What's going on here.

Felipe Arevalo 8:10

Exactly.

Chase Peckham 8:11

And you're freaking out and you're not talking to your boyfriend anymore, but you still are legally responsible for the car for that car debt. Right.

Felipe Arevalo 8:18

Right. Exactly. And it's something where if they don't pay it, you know, for example, a car that's going to get repossessed, guess whose credit report it's going on?

Chase Peckham 8:26

Right. You don't, he doesn't make the payment or they don't make the payment that the co-signer is also getting that on their, on their record. Just like that co-signer would get positive points if they did make their payments every single month. So it can work in your favor as well, if you trust that. But I just don't know how many times I have seen it, where it has just absolutely ruined people and made things even worse.

Felipe Arevalo 8:49

I feel like we've seen so many, we've seen it happen so many times where when you hear about people even thinking about doing it, you can't help, but shake your head and say, oh, I don't know. You're walking a very tight rope there. And maybe you should re I always say, during our budgeting presentations, I give that example, the car buying one. And then because we've heard it so many times, and then I say, you know, what you could have done is had that be a good financial teaching moment. Look over to your significant other and say, you know, I know you like this car. I know you're really set on it, but maybe this is a sign you should get a more affordable vehicle that financially makes more sense. Now, solid financial advice. It may get you dumped at the car dealership. So it's not good dating advice, but your credit will be safe.

Chase Peckham 9:41

Right. For the most part. Yeah. I mean, the thing is, is if you can't afford it on your own, now there are situations. My parents co-signed for my apartment when I was in college, my senior year, knowing full well that they were going to make the payment on it. Right. My parents, I was lucky enough that they were paying for my apartment. Um, although I had to make the payments, I still were making the payments and everything, but they knew that they went into it knowing we're, we're taking care of this, or, or we know if a payment doesn't get made, we're going to make up, we have the money to take care of this. We're not.

Felipe Arevalo 10:17

They could cover it. Right.

Chase Peckham 10:19

So I get this question all the time. And so, so I'll pass it along to you. Will you co-sign for your kids? It completely depends. I will not. Co-sign on a vehicle for them if they wanted to buy a new vehicle. And, and they, uh, you know, they think it's really neat, but dad, I have to have that BMW, blah, blah, blah. And they're 25 years old. No. If they can't afford the car, uh, without my co-signature, then absolutely not. Now if they needed a place to live and they're in school and they wanted to live off campus. Cause they were in the dorms for a certain amount of time. Uh, and their portion of the rent is a certain amount. Then yes, I would probably go on the, the application for my child to, to get into an apartment. Um, but I also know that I'm paying at this point in my, our lives. I will probably be paying for that living in that scenario as well. Now, if I had to co-sign for an apartment when my son is off to go get married or, or wants to be on his own and wants to live in this sweet pad with a nice pool and everything else. Um, and it's above his means then no, I mean, this scenario is completely different. Uh, it just depends on the situation. So.

Felipe Arevalo 11:28

What about their first credit card? Maybe they're off to college. Living on the dorms, have a car that's paid for nothing fancy, but they want that first credit card and they just got declined.

Chase Peckham 11:40

Yeah. Well that's interesting. Yes, I probably would. Um, or I would, if they were getting their own car and that's what I would do typically is if I bought my kids a car, let me, let me step back a little bit. If I were to be lucky enough where I could purchase my kids, a car for their, when they are old enough to drive. And a lot of us parents do that, we'll buy an old used car. But what I would do is I would go through the process and I wouldn't just say, here it is, you know, congratulations kid. I would put them on the, on, on the loan, even if it was a small loan, right.

Felipe Arevalo 12:14

Even if you're paying for it.

Chase Peckham 12:14

Even if it's a used car and I'm paying for it, I would put them on the loan as a co-signer. And as, at the same point, now I'm doing it for the reverse reasons that we were just talking about. I want to help them establish credit at a year early age, but not only that, I want them to understand that making these payments every month is a responsibility. It's something that if you want this car, you're going to have to do it. So I would also make them pay a specific amount for it. Meaning they have to have skin in the game, right? There's a way of doing this. My friends and I were just talking about, they have a 15 and a half year old son.

Felipe Arevalo 12:47

Oh driving.

Chase Peckham 12:47

And they went out and got him and they went out and they, they found a pretty decent, a Honda civic and it was in, and it ended up with this world that we live in right now.

Felipe Arevalo 12:57

So expensive.

Chase Peckham 12:57

They especially for used cars, right? They thought we're going to go out and buy a used car. It was honestly, this is the truth. It was cheaper for them to buy a new, you a new Civic than it was for them to go buy a used Civic.

Felipe Arevalo 13:14

Yeah I believe it.

Chase Peckham 13:14

And they would get all the updated stuff. And literally it was a hundred dollars difference. It was, it was unreal. The way this used car thing is working. And, but for them, they were like, well, yeah, we can't, what kind of parents? We, we get our kid a brand new car,

Felipe Arevalo 13:27

Right

Chase Peckham 13:27

So part of the deal was, is they had to spend, they had to either put, this is a part of it. They either, because they knew their son was working and, and was making money. And he also had money in his bank account that he had gotten over the years with birthdays and all that stuff with grandparents.

Felipe Arevalo 13:42

Yeah.

Chase Peckham 13:42

And they said, you're going to do one of two things.

Speaker 3 13:44

One you're either going to put an amount down as a deposit, right. Or you're going to make a part of the monthly payments.

Felipe Arevalo 13:54

Oh that's fair.

Chase Peckham 13:55

So he had to choose which one he wanted to do. So one is a bigger chunk out of his bank account,

Felipe Arevalo 14:01

Yeah up front.

Chase Peckham 14:01

Or he's just going to make monthly payments. And it was his decision, but they were like, we're not going to go buy you a new car and teach you like, this is just falls out the sky.

Felipe Arevalo 14:08

Not how it happens.

Chase Peckham 14:09

This is your, you have skin in the game. This is your vehicle paying for it as well. So that was part of the deal. And.

Felipe Arevalo 14:16

What did he take, what option?

Chase Peckham 14:18

The down payment.

Felipe Arevalo 14:19

Oh, really?

Chase Peckham 14:20

Smart young man. Yes.

Felipe Arevalo 14:22

He doesn't have to deal with it.

Chase Peckham 14:22

He doesn't have to deal with it monthly. Right? Exactly. And he, he had, uh, I'm not going to say how much it was,

Felipe Arevalo 14:29

But he had the money available.

Chase Peckham 14:29

It in his bank account and it was worth it to him to make that that significant amount of payment. Yeah. And it, and it actually, from a, from a financial state, uh, standpoint, we're all looking. I looked at it and said, man, that kid is smarter than he knows. Because eventually when you do that, you're paying a lot more interest in the monthly obligations than you are when you put more money. So let's,

Speaker 2 14:53

Especially if we had the money just sitting around, it's not like he was investing it or doing.

14:58

[inaudible],

Chase Peckham 14:59

Not everybody You know, in that situation, their kid was,

Felipe Arevalo 15:01

I think it's a great idea.

Chase Peckham 15:01

He saved his money. He had it. And, but at this point, he's gonna learn that he's going to take care of that car more. It's going to be, he's a part of it.

Felipe Arevalo 15:12

That's his hard earned cash.

Chase Peckham 15:13

That's right. And he can literally look at it and go pride of ownership. I mom and dad, didn't just give this to me. He put in,

Felipe Arevalo 15:20

He helped purchase it he bought it.

Chase Peckham 15:20

Yes. It was painful. He did that. Yeah.

Felipe Arevalo 15:24

Imagine as a kid giving up, uh, I would imagine a big chunk of your savings at 15.

Chase Peckham 15:29

Yeah.

Felipe Arevalo 15:30

Just like years worth of savings.

Chase Peckham 15:32

Yeah years. Did it take for him to build that up? And here he is. So, yes. I thought it was very great parenting,

Felipe Arevalo 15:41

That's a good way to do it.

Chase Peckham 15:41

But yeah. And that's something we would teach now, on the other hand, if this was a girlfriend or a boyfriend, and that person wanted to buy a nicer car and they needed your co-signature to do it, I'm not so sure that's a smart move because you don't,

Felipe Arevalo 15:57

No I don't think so.

Chase Peckham 15:57

There's no li you are putting your a legal obligation into the game, but you don't technically own the car.

Felipe Arevalo 16:03

Right.

Chase Peckham 16:04

Or, or you're not getting the benefit of it.

Felipe Arevalo 16:06

Right. You're not driving it. It's not your car.

Chase Peckham 16:08

He stops paying it damages you.

Felipe Arevalo 16:10

Right.

Chase Peckham 16:12

What's the P what's the point here?

Felipe Arevalo 16:13

It's under-insured it gets in an accident that can come back and get you as well.

Chase Peckham 16:18

Oh, no. Without a doubt.

Felipe Arevalo 16:19

I f yeah. If that vehicle is lost, stolen, lost in an accident and it wasn't properly insured, you're still on the hook for that amount, whatever t hat, that amount happens to be.

Chase Peckham 16:32

Yeah. Well, it's interesting because there was an article which you made, you send this to me and say, man, this is really good. And it, man, it conjured up a lot of information, uh, thoughts and, and, uh, memories for me coming up, talking to people, but the headline of this article, and then this'll give you a brief synopsis is my girlfriend. Co-signed my mortgage. I paid the mortgage for four years, plus$125,000 down payment. She paid the utilities. Now she wants half and it ends up and I'm not going to read the whole thing, but it ends up that the relationship's not working out at this point. Now she co-signed, he put a hundred and twenty-five thousand down in his own name or in it, out of his own bank account.

Felipe Arevalo 17:12

Yeah.

Chase Peckham 17:12

And she paid the utilities on the house, living with him. They played house for awhile, and now it's not working out. And whether she feels scorned or whatever, it might be sad that the relationship's not working, whatever it is, she wants probably to sell the house and then gain half of the income on it. Then he's like, wait a minute. You know, I did, I did I screw myself here because I had her co-sign on it. And, and.

Felipe Arevalo 17:41

The answer is maybe.

Chase Peckham 17:42

The answer is maybe because there's no clear, defined definition of this, but there's a lot of what ifs,

Felipe Arevalo 17:48

Right? It's definitely something where you ask him, if you could ask him a few more questions, you can give him a straight answer and say yes or no, you're in trouble.

Chase Peckham 17:58

Right.

Felipe Arevalo 17:58

But potentially it could be a really bad financial situation that we're, that they're in.

Chase Peckham 18:05

Right. I mean if she's on the deed, if she's on the deed as a home, as a co-owner,

Felipe Arevalo 18:08

as a co-owner, then he,

Chase Peckham 18:11

that sees bunk, they're going to have to sell and that he's going to sell.

Felipe Arevalo 18:13

Or buy her out.

Chase Peckham 18:15

Or try to buy her out. That's right. But if she's just a co-signer and he's actually on the deed and she was just on the co-signer for the actual mortgage, then that's a different story. She actually put in all kinds of, uh, she's putting a lot of risk into it and gaining nothing, the benefits of buying.

Felipe Arevalo 18:33

It's also a state thing depending the state.

Chase Peckham 18:34

She's not losing either, unless of course he decides down the road to just give it up. And now the house is being foreclosed on and her name's on it, which is primary.

Felipe Arevalo 18:44

Well, you know, what else they could do though, is if they do break up and even if he, if he doesn't, he has got to refinance that loan because if she goes out to try and buy her own place,

Chase Peckham 18:54

Yes correct.

Felipe Arevalo 18:54

And they're going to see, and they're going to say, you already have a mortgage.

Chase Peckham 18:57

Right.

Felipe Arevalo 18:57

You can't, you can't get a second one, you know,

Chase Peckham 19:01

To refinance and refinance on his own without her on it, which is possible. They can do that. Got come to be able to do it right.

Felipe Arevalo 19:10

Depending on his financial situation, he may be able to do that. And he may not, but it's scary how Google knows what, uh, headlines I'm going to click on, uh, on a Friday afternoon

Chase Peckham 19:22

But it is, it's more common than you think. Yeah. A lot of people will. Co-sign because they love, you know, even just dropping by the dealership and you go, Hey, let's just go look at cars. And you may not even have thought of getting a car. And then all of a sudden the dealer is going, Hey, man, I tell you what we can, we can buy your car right now. We can trade it in. We can get you in a new one. You're excited.

Felipe Arevalo 19:45

You were in for an oil change.

Chase Peckham 19:45

Right. And the girlfriend's going, oh my gosh, that car would be really nice. And, but you can't afford it without it. And then she decides, oh, but if we co-sign, we can get it together. You know, you're on the hook for it.

Felipe Arevalo 19:55

Right.

Chase Peckham 19:57

If it doesn't work out, who's getting the car in

Felipe Arevalo 20:02

Trouble, right. Who's going to keep the car and keep that financial responsibility. I mean, if it's an amicable breakup and one person can afford it and take the car, they could refinance and take the other person off. But that might not always be the case.

Chase Peckham 20:16

Breakups can be nasty. So you can really say, you know what, I'm going to stick it to her.

Felipe Arevalo 20:22

Yeah is can be done out of spite.

Chase Peckham 20:22

Right. Exactly.

Felipe Arevalo 20:24

And it's something where you open up yourself to, to that potential by doing the co-sign, but you're right. They could have been at the dealership like, you know, can you drop me off so I can get an oil change? And then all of a sudden, or pick me up to get an oil change or a recall or something. And then they're like, why don't you park? And come on in this, guy's showing me this brand new 2021, whatever. And they got a great deal going right now. And they'll give me more money than my car's worth because of the used car thing. And, and then you're sitting there all of a sudden, you know, four hours later because

Chase Peckham 20:58

You're still sitting at the dealer's desk.

Felipe Arevalo 20:58

That little cubicle.

Chase Peckham 20:59

All of a sudden, you're going okay. And you've negotiated back and forth for four hours.

Felipe Arevalo 21:04

Now you've invested half your day.

Chase Peckham 21:04

You're signing all the papers now and all of a sudden, you're going, oh man, should we have done this?

Felipe Arevalo 21:12

What am I doing?

Chase Peckham 21:12

I already signed, oh my gosh, what did I do? And then you've got to go, well, it'll all work out. It'll all be fine.

Felipe Arevalo 21:17

And then each dealership has their own little cheesy thing that they like to do to congratulate you on your car purchase,

Chase Peckham 21:22

All the upselling too.

Felipe Arevalo 21:23

Yeah, exactly. You

Chase Peckham 21:25

Extended warranties that you'll get phone calls for three years.

Felipe Arevalo 21:26

Three year plan on your windshield.

Chase Peckham 21:28

The next three years you'll get calls about extended warranties that are running out. You need to

Felipe Arevalo 21:33

Those start up like the next day too.

Chase Peckham 21:35

Oh my gosh it's so bad.

Felipe Arevalo 21:35

I don't know how they know, but you know, it's, it's a, it's a risky, I think co-signing, but I do tell people when, when we talk to young people and say, how do I get my credit started? How can I I've gotten declined? I don't know what to do. You know, you can go to a secure credit card, but.

Chase Peckham 21:55

That's a good way to go.

Felipe Arevalo 21:55

Also if you have a parent who's willing to risk for you, you know, that is a possibility where if you can, now you're, they're putting their credit on the line for you. So you gotta be responsible and make sure that you don't mess that up for them.

Chase Peckham 22:09

And when parents can give their kids a footprint as well, if they make them an authorized user on a credit card, now it's not the same as having your own account. Uh, but it is a way of, of, of having them learn how to use it. And.

Felipe Arevalo 22:21

You don't even have to give them the card,

Chase Peckham 22:23

that's correct. Don't even have to give them a card, their associates. That's another way you can co-sign for a credit card of theirs. And you know, don't even let them use it and you can start establishing their credit. Uh, and you can put one thing on it or that you pay every month.

Felipe Arevalo 22:37

If they got to pay for their own cell phone, if you were to get a credit card, put the credit card on the cell phone, and there you go, that's it.

Chase Peckham 22:44

Every month, your cell phone there. Right? Exactly. Uh, there was a story that I had when I, when we first started doing this, when I was, it was back in 2009 or 10, and I was working with a young lady and she just was so distraught and her credit was just destroyed. And she was 22 years old. And I'm like, how is this possible? And she started down the road and telling me this story about her parents had started a business and the business wasn't going very well. And their car had been repossessed and she was not living with them at the time. And they, they were like in dire straits and they were, they reached out to her and they said, we, we, we need a car. We don't have the ability to get a loan. Nobody will let us sell us a car right now. Um, we could, we really need your, your coasts. Could you co-sign for this car?

Felipe Arevalo 23:39

Right.

Chase Peckham 23:39

We promise that we'll pay it. Don't worry, blah, blah, blah. And of course, it's her parents, right? Doesn't want to see them struggle.

Felipe Arevalo 23:46

It's hard to say no to family.

Chase Peckham 23:46

She doesn't want to see them, not have a way to get around. She doesn't want to see them not succeed. And so she reluctantly, but did, because she cares about her family co-signed for this truck. And eight months later, her parents, just her, she started getting phone calls and the parents just stop paying it.

Felipe Arevalo 24:08

Oh no.

Chase Peckham 24:08

And she was getting phone calls about paying on the, for the car, uh, from the credit union or wherever they got the loan.

Felipe Arevalo 24:16

Right.

Chase Peckham 24:16

And it crushed her credit and she didn't do anything wrong, but she had a repossession. She was trying to help her parents and her parents did. I mean, purely beyond the fact that I, it just broke my heart. That parents would be so terribly, terribly, just, I mean, use the right word, but absolutely treat their child and put them in such a bad position.

Felipe Arevalo 24:42

Right.

Chase Peckham 24:43

Now part of it probably is that that's just the way they've always lived their lives. And it's no big deal. She'll rebound, blah, blah, blah. She's tough. But they put her way behind the eight ball.

Felipe Arevalo 24:52

Well, it should have been a red flag that the fact that they didn't have a car was because their previous was reposed.

Chase Peckham 24:57

But she's 22 years old and it's her parents and they're begging her and they're looking at her, you know what I mean? That's a lot of pressure to put on a kid when you're talking about feelings. You're sh she loves her parents. She, she, she probably had that like uneasy pit in her stomach because she didn't really want to do that. But at the same time,

Felipe Arevalo 25:16

You can't leave them hanging.

Chase Peckham 25:16

These are my parents.

Felipe Arevalo 25:17

Right.

Chase Peckham 25:18

Yeah. And they did all this for me. And they shot, she said that too, that her parents would say, oh, all the things that we did for you, we clothe you. We fed you. Um, by the way, that's part of having a child,

Felipe Arevalo 25:29

Right. It's part of the commitment.

Chase Peckham 25:30

You're not doing them any favors.

Felipe Arevalo 25:32

It's not like you did anything extra. That's what you signed up for.

Chase Peckham 25:34

That's what you signed up for through the time their, 18 years old. And it's just being a good human being. But they, you know, they they'd completely screwed her. And that has stuck with me for so, so long when we ended up helping her, we got her off that thing. Um, because her parents had had a rap sheet that were pretty long and we got her, an attorney that helped her with that. And you know, it, it eventually fell off. But I mean, at the same time, she still was going to take 4 years for that to fall off her four more years to fall off her credit report. But anyway, it. That's tough.

Felipe Arevalo 26:09

Yeah. But you hear stories like that all the time. We do yeah.

Chase Peckham 26:12

And that's why, you know, w we talked to people and they'll say, oh, you know, I, I was, we should co-sign I was going to co-sign for my so-and-so's this. And they were like,

Felipe Arevalo 26:22

oh, I know.

Chase Peckham 26:22

I don't care how much you love this person.

Felipe Arevalo 26:24

Yeah.

Chase Peckham 26:25

Look, if you're married, it's a different deal. You're going in together.

Felipe Arevalo 26:28

Yeah.

Chase Peckham 26:28

This is, this is, you know, you're there there's legal boundaries for you because no matter what happens, whether you're a co-signer or not, if you're married, legally married in California, you're getting half anyway. If it doesn't work out, but if you don't have that protection, if you're just boyfriend or a girlfriend, if you put your name on a legal document, you're responsible for that. And you need to take the responsibility and take it as such,

Felipe Arevalo 26:52

Right. It's something where you have to know what you're signing up for. And you have to be able to sometimes make the hard decision to say no. And, and, and it may, in the short term be difficult where you have to say no. And in the long-term though, potentially it could be a big benefit. You'll be, you might be very happy that you said no. If that relationship doesn't work out, uh, you know, like you mentioned, once you're married, there's a lot of other things going on.

Chase Peckham 27:26

Let me preface that though. When we talked about marriage and it's jumped to my mind is going into a marriage, you don't automatically assume the other person's credit that they came with.

Felipe Arevalo 27:37

That's a good point because there's that little bit of confusion.

Chase Peckham 27:38

S o when you do get married, it's not now all of a sudden you own their debt. You don't, it's, it's what you do together, contractually, u h, where you're, u h, where you're a part of that. Now, if you're together and you're married and you're now splitting up all your assets and your, b ecause y ou're getting divorced, that's a whole different deal. Right. You're coming up with a number of the attorneys, all that stuff, right. It's, u h, you know,

Felipe Arevalo 28:01

Splitting investments. We're going to bring in.

Chase Peckham 28:03

Community property.

Felipe Arevalo 28:04

We're going to bring in an expert on again for that, um, to go over that.

Chase Peckham 28:09

Yeah. That's a great, yeah, it's a great title. Make it over because there are so many, what are you responsible for? What aren't you responsible for? Uh, you are not responsible for that person's debt, just because you get married,

Felipe Arevalo 28:18

Right. It's not something Where your credit reports will, will not magically kind of pull themselves in either direction. That's when we get a lot and you're like, they have bad credit. It's going to ruin my credit. No. I mean, if they continue with bad financial habits,

Chase Peckham 28:34

Right you might want to look at that and find out why.

Felipe Arevalo 28:36

Right. Then maybe, yeah, that might be Right. But the fact that you got married doesn't mean that it automatically merged. You know, if you start joining, you know, co-signing on things and homes and cars and whatnot that yeah. Or they start building debt on your cards, or you start having to pay for more to try and keep up, keep up with the spending that can hurt your credit. But just the fact that you got married, doesn't do anything to your credit report.

Chase Peckham 29:06

Are you going to do that for your kids? Will you co-sign with, have you ever been asked to co-sign on something?

Felipe Arevalo 29:11

I have not been asked to co-sign on something

Chase Peckham 29:16

I'm proud to say your families.

Felipe Arevalo 29:17

Yeah, my family. They, they do.

Chase Peckham 29:21

They do their own stuff. Yeah. They do.

Felipe Arevalo 29:21

Mine too I've never been asked to cosign either. My brother, when he, I went car shopping with him when he was about 18. My brother was a very young college student in a very young college graduate. So he was, that was right after college. So he was 20, but he was already graduated and already working, and we went into the car dealership and the guy was looking at him like, yeah. Are you sure you can prove your income? Are you sure you can? And he was like, just run my credit. I've been paying my student loans. I'm 20, but I've been doing this for a long time now. Um, and the guy was like, you'll co-signed for him. Right. I was like, I don't think he needs it, but, and then they eventually ran his credit. And then when they're like, oh yeah, we'll sell you a car. And he was like, actually, I don't even want this car anymore. Uh,

Chase Peckham 30:14

After the hassle he just went through Yeah, maybe this isn't a good idea.

Felipe Arevalo 30:16

Yeah. So he did not buy a Chrysler 200. Um,

Chase Peckham 30:20

Oh thank God because.

Felipe Arevalo 30:22

Those cars came out pretty unreliable.

Chase Peckham 30:24

Well, not only that, but is he, he's a 20 year old, 50 guy. I mean, 50 year olds buy that car, not.

Felipe Arevalo 30:31

He did listen to a lot of like fifties and sixties music.

Chase Peckham 30:34

He's an old soul.

Felipe Arevalo 30:34

So yeah. An old soul, but he had no, he ended up going with a Civic, uh, which is a smart choice.

Chase Peckham 30:44

That's a little more his age I like it.

Felipe Arevalo 30:44

Exactly. And, and it's something where, you know, that was the only time where he, but he didn't ask me the car sales guy was like, oh yeah, your brother's got you. Right. Your brother's..

Chase Peckham 30:54

Yeah no way.

Felipe Arevalo 30:54

Um, but no, I didn't have to would I co-signed for my kids when they get older. I think so. As long as it's something where, you know, I love, I love the car idea that you mentioned. That's a really good idea. Like put your skin in the game and you want the car jump on it on the loan and one way or another, or if it's something like a small credit card that I know that I can handle in the event, that they really mess it up. And I can say, look, you cut that credit card up. We're going to close it. I'll pay the$500 and then we're done.

Chase Peckham 31:32

Good.

Felipe Arevalo 31:32

Uh, you know, but I would hope that they would have figured it out before then, but you gotta be careful co-signing on like a$500 credit card because you don't know if that creditor, all of a sudden, a year down the road bumps up your credit limit, you know, by 3000% or whatever it is. And all of a sudden, it's like a giant thousands of dollar credit card. And you're like, wait, I just co-signed for$500 card, what happened?

Chase Peckham 31:58

There's certain things that you can do. You can make sure that it's signed up and you get notifications. If you co-sign and you get notifications, if it's been paid or it hasn't been paid, so you can stay on top of it. But just to blindly do it, uh, I think is dangerous. And as much as I love my children, as much as I, you know, I would trust that they would do the right thing. They're all still kids. And they may not make, they're not going to make the right decisions all the time.

Felipe Arevalo 32:21

They're going to make mistakes.

Chase Peckham 32:21

So I have to protect myself. I don't want that. So I would put very, you know, kids want financial help that are going to get, there's going to be limitations and they're going to take a lot of responsibility for it. It's just, that's just part of, part of life. And I think the same thing goes for, um, a boyfriend or girlfriend, if the situation and they co-sign. And they, I would have a legal document signed that if we break up, you take, you assume all responsibility. And even that might not be binding. Right. So.

Felipe Arevalo 32:47

I would say depends on the State and the different regulations, local guidelines.

Chase Peckham 32:53

Yeah I would think twice I really would.

Felipe Arevalo 32:53

Yeah. I really want maybe something,

Chase Peckham 32:56

Unless there's as Beyonce would say, put a ring on it. No, I'm just kidding. well with that. I will say that if you're ever in that situation, um, just think that what are the benefits to you by doing that? Uh, and for the most part, There are very little, unless, Unless you are gaining a direct benefit from it, like You're, co-owner of your home with your wife, which you guys are building a life for yourselves. you know, there's a major benefit.

Felipe Arevalo 33:23

Right.

Chase Peckham 33:23

But if you're being asked to co-sign and it's benefiting only the other person, um, and you only stand to lose in that situation, it may or may not be a smart move with that. Um, if, if you like this podcast, when you, you love this podcast, please like us, download us, leave a rating, you rate us and, um, we'll see you next week.[inaudible].