As defined by the National Commission for the Protection and Defense of Users of Financial Services, it refers to the person who, in solidarity, participates with the owner of a financial transaction, usually in credit and financing. In this way, the c o-creditor also acquires the same obligations as the principal debtor.
What are the advantages of having a co-credited when you apply for a loan?
In these cases, the most common is to choose the husband or wife as co-credited so that both acquire the loan. The advantages of opting for this alternative are:
Access to a more significant amount of credit: They may acquire a higher value property by joining their salaries.
Payless for monthly payments: Sharing the costs makes it more convenient for both to pay and even pay more than if it were only one.
Each one owns: – This gives you certainty if you live in a combined house, and it is not in your plans to get married because you acquire the security of obtaining a property owned by both.
If one of the two dies, the credit is extinguished: If they opt for a co-credit through joint conjugal coverage (spouse), and one of the two passes, the balance to be owed will be at zero if they comply with the documentation indicated in the adhesion contract.
What are the disadvantages of being co-credited on a loan?
If your co-credit is not paid: Take your precautions. If your co-creditor is not organized in their finances, they are likely to have conflicts when they default on the loan payments, and both will be affected.
If you fail to pay: If you are not disciplined with your money, do not consider this credit scheme because it is very likely that you will forever damage the relationship with your co-creditor. Before taking out a shared credit, consider how much you should set aside from your income for long-term debts. For example, if you use the FOVISSSTE credit, it is calculated individually, and biweekly, 30% of your income is deducted.
Highly risky than bank acceptance
Taking a loan is a risky process. That is why lending institutions or banks need a co-signer. You have to pay back the loan money. You need to have a good credit rating and a track record to earn the lender’s confidence. Loan takers compel you to take different risks to satisfy the lenders that can put you at a disadvantage. Borrowing a higher amount is the most considerable risk as you don’t know how to pay the loan back. You should avoid the risk if the taken risk is greater than the tolerated rate of commercial lenders.
If they propose to be co-credited for a loan, is it worth it?
It depends on the responsibility of each person. If you decide to have a debt shared with your spouse, for example, to pay for a house, there is always the risk that they end the personal relationship (for whatever reason) and have to share the property that, also, still do not finish paying.
In those cases, one option is to transfer the credit to a third person who acquires the rights to the property and who is in charge of paying. Another alternative is to reach an agreement, liquidate the property (house or car) and sell it later. However, this “solution” is long-term and generally more expensive. Value the advantages and disadvantages that impact your relationship with the co-credited, both in the present and the future, and make the decision based on respect for both parties.
Co-signing a loan
It would be best if you had a co-signer for the approval of the loan, as it can be your sibling, parent, or relevant co-signer. You will need to explain all their pros and cons about what you are asking them to do. It will be a higher risk if you cannot pay all your monthly bills and ask a random person to be a co-signer. However, it can damage your finances and your relationships with your lenders or bankers.
The co-signing process is not a timeless commitment, but the co-signer must be active throughout the entire loan term. You can replace the co-signers if they are not fulfilling their responsibility well.
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