Cosigning a Loan;

Beware of the Legal Pitfalls and Dangers in a NJ Loan Contract

If you’re asked to cosign a loan in New Jersey, a little thought beforehand can save legal hassles down the road.

If you’re asked to cosign a loan in New Jersey, a little thought beforehand can save legal hassles down the road.

Regardless of whether you're being asked to cosign for a car loan, student loan or mortgage, you should give careful thought and consideration to the "what if" situations before agreeing to cosign a loan.

The cosigner of a loan in New Jersey agrees to be responsible for a loan's repayment if the borrower defaults on the payments. With most cosigned loans, the lender can request payment from the cosigner at any time, whether or not the debtor is actually in default on the loan.

A cosigner will in most cases also be responsible for any late charges, penalties and legal fees associated with a default. The lender in NJ can:

     Sue you and get a judgment against you

     Make you disclose your assets, and

     In extreme cases, force the sale of property you own to pay the debt

In addition, if the debtor defaults, the lender will probably notify the credit bureaus, which can hurt your credit history and credit score.

For these reasons, it's important that you not cosign a loan unless you have the financial means to pay off the loan should the primary debtor default. If you can't afford to repay the loan with your own money, you shouldn't volunteer as a cosigner.  You can reach Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.

Questions for Your Attorney

Before cosigning a loan with a friend or family member, consider hiring a lawyer to draw up a contract that spells out each person's obligations regarding repayment of the debt, and details the steps you'll take if one person fails to make the required payment. Although this contract won't provide any relief if the lender decides to pursue you for non-payment of the loan, it will help formalize your relationship with the person for whom you're cosigning the loan.

NJ Contract | NJ Contract Law | Co-Signing a Loan | L