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Hypothetical situation:

A dear friend or family member comes to you and asks you to co-sign for their loan. Let's say the reason they need the money is not a life-or-death type of situation. Perhaps they need something (a car, to get to a job) or want something (a kitchen renovation) – but we're not talking about a serious medical or other "emergency" issue. (I think co-signing then is a separate question.)

Anyway, let's say you'd rather not co-sign, since you know how co-signing for a loan can lead to problems for you down the road. (Refer to this question, and this question.)

What are some ways you could politely – but effectively – reject a friend or family member's request for you to co-sign for their loan?

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    I don't think this is anything to do with finance. How to say something politely is about interpersonal relationships.
    – DJClayworth
    Sep 6, 2019 at 18:25
  • @DJClayworth Agree. FWIW, I posted this when this site was 5 months old. Now we're approaching the 10 year anniversary and have a better idea of what's on-topic :) Meanwhile interpersonal.stackexchange.com wasn't a thing until ~2.5 years ago. Do you think this question is suitable for migration there? I haven't participated at that site yet. Or we could close & delete.
    – Chris W. Rea
    Sep 6, 2019 at 19:53
  • ... but there's the "too old to migrate" issue. I wonder if a moderator could migrate a question despite the age, if the other site were willing to accept it.
    – Chris W. Rea
    Sep 6, 2019 at 19:57
  • Why not just leave it as it is? The OP has some reasonable answers here. If the OP doesn't find any of the answers useful, I suggest he ask another question along the same lines, but being more specific on what he wants, and explaining why the answers here are not helpful. I haven't looked at Interpersonal Relationships in over a year, but I don't think the OP would get better answers there. I suggest the OP do some reading on Interpersonal Relationships to see if he is likely to get a better answer there.
    – ab2
    Sep 7, 2019 at 1:23
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    The discussion is probably better had on Meta.Money, but I'd be happy to have this question grandfathered in and protected for historical value. Plus, it's amoney matter that's still relevant and of interest today.
    – Lawrence
    Sep 7, 2019 at 17:43

10 Answers 10

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I'll take an alternate route: honesty + humor. Say something like this with a smile and a laugh, like you know they're crazy, but they maybe don't know it yet.

"Are you crazy? Co-signing a loan can put us both in a lot of potential danger. First, you shouldn't get a loan that you can't afford/attain on your own, and second, I'd be crazy to agree to be liable for a loan that someone else can't get on their own. You want something bad enough, you get your credit rating in order, or you save up the money - that's how I bought (my car/house/trip to Geneva). I'd be happy to point you in the right direction if you want to put a plan together."

You're offering help, but not the kind that puts you in danger. Declining to co-sign a loan can't damage your relationship with this person as much as failure to pay will.

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  • Ha ha - good answer!
    – Nat_Rea
    Feb 21, 2010 at 0:12
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    I don't see any humour in this answer. In fact, if you said that to me, I'd be pretty sure you were mocking me and calling me stupid as well as refusing to help. The reasons you give for not co-signing are excellent; the delivery you suggest is terrible.
    – David Richerby
    Dec 14, 2015 at 9:24
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    lol - well I can't guarantee it will work for everyone.
    – jefflunt
    Dec 15, 2015 at 14:00
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I have been in this situation and I essentially went for the truthful answer.

I first explained that co-signing for a loan wasn't just vouching for the person, which I certainly would do, but it was putting my name on the loan and making me the person the lender would go after if a payment was ever missed.

Then I explained that even within married couples, money can be a major source of strife and fights, it would be even worse for someone not quite as close like a family member or friend. Essentially I wouldn't want to risk my relationship with a good friend or family member over some financial matter.

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"I really don't feel co-signing this loan is in the best interests of either of us. Lets talk about the amount of money you need and perhaps I can assist you in another way."

I would be honest and tell them it isn't a good deal for anybody, especially not me. I would then offer an alternative "loan" of some amount of money to help them get financing on their own.

The key here is the "loan" I offer is really a gift and should it ever be returned I would be floored and overjoyed. I wouldn't give more than I can afford to not have.

Part of why I'd be honest to spread the good word about responsible money handling. Co-signed loans (and many loans themselves) probably aren't good financial policy if not a life & death or emergency situation. If they get mad at me it won't matter too much because they are family and that won't change.

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I'm going to be buying a house / car / home theater system in the next few months, and this loan would show up on my credit report and negatively impact my score, making me unable to get the financing that I'll need.

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    That's a good one, too. Very reasonable.
    – Nat_Rea
    Feb 21, 2010 at 4:46
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    @Nat_Rea, Not if it's meant to deceive.
    – Pacerier
    Nov 13, 2013 at 4:20
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Simple and straight-forward. "I'm sorry but I don't co-sign loans. I've heard horror stories (or had bad experiences if you actually have) about these things going bad and ruining friendships. Your friendship is more important to me than you getting this car/stereo/whatever."

You could go on to explain that it's not necessarily a lack of trust in them, but the problem could be caused by things beyond either of your control. Let's say there's an error at the bank and his payment doesn't get processed on time and it hits your credit score. Next thing that happens is your credit card company sees the change in your score and jacks up the rate on your card.

Neither of you did anything wrong, but now instead of him just fighting with the bank about the payment not getting processed on time, you are having to fight with your credit card company. You are both in an awkward situation. You might get pissed at him (you could make this out to be a failing on your part) even though it wasn't his fault. Or he might be embarrassed to come around even though you know it wasn't his fault and aren't pissed at him.

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  • I think this is the best answer. It is honest and it makes it clear to the friend that it is not his fault.
    – Erel Segal-Halevi
    Dec 15, 2015 at 5:37
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My reply would be a serious, "Oh my word! I was going to ask you the same thing!....guess that's a no from you". I'd turn it back to them and let them be confused and think..gee..I guess she's not that much better off than me. Awkward but that's what I'd say.

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    Perfect. And no way for the other guy to argue the point. All other long answers risk hurt feelings. Friends in this situation don't want a lecture.
    – JTP - Apologise to Monica ♦
    Jun 12, 2010 at 14:03
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    @JoeTaxpayer, But if this is a lie, it will just complicate things sooner or later.
    – Pacerier
    Nov 13, 2013 at 4:20
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Oh, how about something like

"I'd rather not. It exposes me to more financial liability than I want. If you were in the hospital, or some emergency like that, it might be different, but..."

  • straightforward, honest
  • noncritical
  • disclaims personal obligation to underwrite their projects
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"No, I don't mix business and personal affairs."

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'If i co-sign that makes me 100% liable if for any reason you can't or won't pay. Also this shows up on a credit report just like it's my debt. This limits the amount i can borrow for any reason. I don't want to take on your debt, that's your business and i don't want to make it mine'.

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This is a real difficult situation and I think the correct way to proceed here is to be honest and straightforward.

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