Michelle Singletary, personal finance columnist at the Washington Post, writes that she gets lots questions from readers that involve friends, families and finances. These focus on whether to co-sign a loan for a relative.
My daughter has to move. Her credit is bad, and she is having difficulty getting approved for an apartment. Should I co-sign? Moving back home is not an option.
Do not co-sign. I know you want to help. However, unless you are prepared to make her monthly rent payments, don't do it. If her credit is bad, this is an indication that some financial issues are there already. Maybe it's because she was irresponsible, maybe not (like she's lost a job). But in either case, don't link your finances with hers. Instead, help her explore various living options. Perhaps she can move in with a friend temporarily.
Our 28-year-old daughter is entering a master's program this fall and we anticipate she will require loans. My wife and I are in our early 60s and expect to retire in three to five years. Should we co-sign an educational loan for our daughter if we are asked?
Do not co-sign if you're asked and certainly don't offer. Co-signing means you are borrowing, too. You are not a backup borrower. And I would definitely not recommend it since you are so close to retiring — unless you have the money to pay the loans. And if you have the money to pay the loans, then just give it to her. (I don't believe in loaning money. It can get complicated and ugly.) It's not too late to encourage your daughter to work and save up to pay the cost of the program.