Credit what is Endorsement

When someone is asked to endorse a product it has rather different connotations to endorsing a loan or a credit card. It would be so much simpler when the bank asks for endorsement before you can put you moniker on the loan agreement, if they just expect you to say “gosh what a good deal” as celebrities do on the advertisements. Unfortunately if the bank ask you to provide a third party to endorse your loan, it means that they don’t assess you as a good enough risk without someone to hold your hand, and take responsibility for your future actions.

The whole world of credit and loan endorsement is often misunderstood. When someone is asked to be a co-signer, or an endorser, or a guarantor, then the full implications are not always considered and can end up with relationships breaking down. It is imperative that both parties read and understand the full terms and conditions attached and realise the consequences.

It is much easier to ask someone to endorse your loan, if you can find someone, than it is to be asked. If you ask you may well be turned down, but the chances are a parent, relative, employer or friend will be willing to do it for you. If however you are the party being asked then you may well feel under pressure to agree so as not to let the other person down, or simply sign without understanding what it could mean to you if the other person turns out to be a tardy payer, or even disappears leaving you holding the debt.

A person who endorses a loan or credit card needs to first ask why the bank requires it. The two main reasons are the person seeking credit is too young to have any credit history of their own, or that the person is deemed high risk. If it is the former and a person close to you such as the fruit of your loins needing a college loan, it can prove to be a worthwhile investment in their future if you know you have brought them up to be financially responsible with money.

If it is a high risk person, such as a sibling with a string of debts, then don’t sign anything unless you would be prepared to give them the money as a gift. You could well end up doing so, but it won’t be a gift but a breach of your trust which you carry the can for.

Anyone who endorses a loan or credit card becomes equally liable for the debt, and is usually seen as the easier target if problems occur with the account. The person who co-signs is putting their own credit score at risk, and it must be good if the bank will accept you as the guarantor. You will be pursued for late and missed payments, and could end up repaying the whole amount whilst the person you signed off disappears into the sunset spending the cash.

Although it may stretch relationships to say no to co-signing, it is in most circumstances the sensible thing to do, as approximately 80% of co-signers do end up paying the price. It is safer to protect your own finances first and help them in some other way. Endorsing a loan can be a thankless task which leaves you assuming a responsibility you may never have envisaged. Of course if you are the one asking you should always make your payments on time and never cause any worry for your guarantor.