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Thread: What are the responsibilities of a co-signer for small business loan?

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    What are the responsibilities of a co-signer for small business loan?

    I don't have great credit, so I've asked a family memeber to co-sign for a small business loan. What are the responsibilities of this co-signer? Are there other options for obtaining a loan without using a co-signer?

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    try Khula

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    Quote Originally Posted by symonddeo View Post
    I don't have great credit, so I've asked a family memeber to co-sign for a small business loan. What are the responsibilities of this co-signer? Are there other options for obtaining a loan without using a co-signer?
    It depends what the contact says. Are they signing surety? If so, they would be responsible for the loan along with you (i.e. the bank could go after their assets if you default on the loan).
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    What are the responsibilities of a co-signer for small business loan?

    A co-signer is on the loan with you. So, they have to pay if you don't and it is reported to the credit world as if they are on the hook for a loan.
    On the other hand, a Personal Guarantee still puts them on the hook if you don't pay, but isn't reported to the world that they are committed.
    So the later doesn't show up on a credit report that they are committed, like a co-signer would. Mind you, they are ethically required to list it as an obligation.
    Last edited by Dave A; 08-Aug-08 at 07:49 AM.

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    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by pitt View Post
    Mind you, they are ethically required to list it as an obligation.
    That would be a listing as a surety though, I'd think. In terms of assessing your overall credit status, that means a factor is applied in determining how this is calculated as part of your overall indebtedness.

    A pretty slick site you got there, pitt. Is that SA local or USA based?
    The trouble with opportunity is it normally comes dressed up as work.

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    Co-signing a loan

    A person who assumes liability for repayment of a loan, even though that person is not the original borrower, is called a "surety". Suretyship documents are devilish legal obligations which make the surety "jointly and severally" liable for the repayment to the creditor. This means that the creditor does not even have to exhaust all its remedies against the main debtor first and can elect to go for the surety first, or (even) jointly with the main debtor.

    There is a rare form of suretyship (which the banks obviously do not like) where the surety undertakes to only pay the deficit after the creditor has exhausted its remedies against the main debtor. This is an "indemnity surety". Maybe this is what the borrower should offer the lender?

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    Quote Originally Posted by Sieg View Post
    There is a rare form of suretyship (which the banks obviously do not like) where the surety undertakes to only pay the deficit after the creditor has exhausted its remedies against the main debtor. This is an "indemnity surety". Maybe this is what the borrower should offer the lender?
    Morally that would seem the right way to go, but it's all about hitting the easiest (and most likely to pay quickest) target, I think.
    The trouble with opportunity is it normally comes dressed up as work.

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