Should I Cosign For a Loan?

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A friend or family member needs a loan, but their credit score is not high enough (due to terrible or no credit history, or massive credit card debt), or they don’t have a large enough down payment or some other reason. So they come to you and ask you to be a cosigner on their loan.

 

What Does It Mean To Be A Cosigner?

To be a  “cosigner”, simply means that you agree to assume the responsibility of another person’s debt if they are unable to pay it. For example, if you are a cosigner on your brother’s $20k car loan, you have now agreed to pay the bank back that $20k (or whatever is left at the time of default) if your brother is not able to pay it back.

Many people will face this dilemma at one point in their lives. In fact, many people will actually cosign for loans even when they do not feel comfortable doing it. It is usually due to not wanting to be the bad guy, or is sometimes a genuine attempt to help someone. This is often viewed as a way to help out someone in need – such as a responsible, young person who just needs a chance to display or prove their credit worthiness; or a way to assist your child at the beginning of their “independent life”. But is this a wise thing to do?

What Does The Bible Say About Being A Cosigner?

Proverbs 17:18 tells us that,

A man lacking in sense pledges and becomes guarantor in the presence of his neighbor.

Right away we see that the bible describes one who becomes a cosigner on a loan as “senseless“! We can see that it is not a wise thing to make a pledge based on someone else’s ability to pay back a loan.

We also see such council in Proverbs 22:26,

Do not be among those who give pledges, among those who become guarantors for debts.

Not only are we instructed not to cosign for a loan, but we are also shown some of the dangers of doing so… Proverbs 11:15 tells us that:

He who is a guarantor for a stranger will surely suffer for it, but he who hates being a guarantor is secure.

So, we are actually told that we will “surely suffer” if we decide to pledge ourselves for another person’s debt; and that one way to stay secure is to “hate being a guarantor“! Those are very strong words to describe what has become such a common practice today.

Also in Proverbs 20:16 we find these words,

Take his garment when he becomes surety for a stranger; and for foreigners, hold him in pledge.

It was common to pledge a garment as security for a loan, but – according to Exodus 22:26-27 and Deuteronomy 24:10-13 – that garment had to be returned by sundown.

The idea here is that one who is foolish enough to pledge himself for the debt of a stranger will most likely never be paid back; so the one making the loan should demand the cosigner’s garment as security for the loan.

This shows the senseless and unpredictable nature of pledging your possessions or your life based on another person’s ability or willingness to pay their debts.

Also, one question that must be asked is, “Why does this person need a cosigner?”. The most basic reason is that their bank does not believe that they will pay back the loan.

They use their own experience, a few calculations and the potential borrower’s history with loans (usually expressed on their credit report) to make their decision regarding the loan.

When they request a cosigner they are basically saying, “We don’t trust this person to be able to pay us back, but if YOU are willing to take all the risk then we will give him the money!

What Should You Do If You Have Already Become A Cosigner?

Proverbs 6:1-5 gives us additional instruction. This time however, the instruction is given to one who has already pledged himself on behalf of someone else:
My son, if you have become surety for your neighbor, have given a pledge for a stranger
If you have been snared with the words of your mouth, have been caught with the words of your mouth
Do this then, my son, and deliver yourself; Since you have come into the hand of your neighbor; go, humble yourself, and importune your neighbor.
Give no sleep to your eyes, nor slumber to your eyelids;
Deliver yourself like a gazelle from the hunter’s hand and like a bird from the hand of the fowler.

As we can see from the strong language in this passage, it is a serious matter to pledge yourself on behalf of another. This is because you have essentially given up control of something that God has given to you as a stewardship, and have become “snared” by your pledge.

This situation is so serious that you must do everything that you can to free yourself from this arrangement and gain back control of your God-given resources. Look at how strong the language is here; you are told to “deliver yourself” and not to sleep until you have freed yourself (see Proverbs 22:7)! You are to act as a gazelle  or bird that is about to lose their life to the hunter!

So, if you are in this situation, it should be your highest priority to free yourself from this before you “surely suffer” (Proverbs 11:15; cf. Genesis 43:9, Genesis 44:32-33).

What can you do instead if you want to help?

If you still want to help while obeying God’s word regarding cosigning, there are a few things that you still can do.

Give Them An Interest-Free Loan:

If you know the person is in need, this is one way to help them that will honor God. Proverbs 28:8 assures us that,

He who increases his wealth by interest and usury gathers it for him who is gracious to the poor.

According to Deuteronomy 23:19-20, it was against the law for an Israelite to charge interest to fellow Jews (of course, loans were only to be requested in times of extreme need and poverty – not to fund frivolous, sinful spending like we see today), but many violated this command. As we see here, giving someone in need a loan and not charging interest is a way that you can assist the one in need and please God.

Give them the money that they need.

Proverbs 19:17 tells us that,

One who is gracious to a poor man lends to the Lord, and He will repay him for his good deed.

If you are able, giving your money to one in need – and only expecting repayment from the Lord – is another way to assist a brother in need and honor God with your finances.

Final Thoughts:

As mentioned earlier, since the bible teaches that debt is slavery (Proverbs 22:7), borrowing should only be done when one has a basic need that cannot be met by their income. It was usually a short-term loan, and the Israelites were commanded to forgive all debt every seven years (see Deuteronomy 15:1-15).

Much of the borrowing that we see today represents a person’s desire to live above their means, and I do not believe that type of borrowing (or giving) is what God is speaking of. Hopefully, I will have a chance to address this in much detail in a future article.

So overall we see that God is completely against the idea of one becoming a cosigner for the debt of another, even if we are really seeking to be a blessing to someone in need. However, the bible does teach us other ways in which we can assist others.

I mentioned stewardship earlier. I realize that this may not be a term or concept that is familiar to many modern readers, but this is a concept that God expects us all to understand. A steward is one who manages another person’s property, finances or other affairs. Here are several articles that do a good job of describing the concept of stewardship:

I would love to hear your thoughts on cosigning – even better would be your experiences with it. If you have any questions on this or other concepts, please leave your comment below.

photo credit: 4PIZON

Contentment Through Appreciating The Basics

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[The following is a guest post by No Debt MBA, who is trying to pay for an MBA from a top 5 business school in cash.]

A few nights ago a big storm rolled through and rain poured down.  I lay in bed listening to the rain pound on the roof and felt a huge sense of luxury and appreciation that I was warm, dry and comfortable in bed instead of out in the rain.

It got me thinking that, though there are hardships, things we don’t have and areas for improvement in all of our lives, by and large we are incredibly fortunate.

Contentment Through Appreciating The Basics

When I go to buy groceries each week I can buy enough to feed my family without worry.  I can walk to the store because I am in good health.  I have access to good health care that I can afford.  I live in a country where you can get a free education through high school, often one that is of excellent quality as was my experience.

When it is cold outside I have shelter, heat, blankets, and tea or hot cocoa to keep me warm.  When it is hot I have fans and cool water to drink.  I have clean water for drinking, cooking and bathing and a sanitary way to dispose of waste and use the restroom.  If I want to talk to my family or friends I can just call or email.  If a family member fell ill I could be on a flight to see them the same day.

Listing it all out I feel incredibly lucky to have all of these advantages though I know that on a day to day basis I might take some or all of these completely for granted.  I think stopping and truly appreciating what I do have helps me feel more content and want fewer things in general.

After thinking about this as I nodded off to sleep that night I felt at peace and the constant to-do list in my head got quiet.  The next day I appreciated the sunshine, the good weather, my morning caffeine fix and breakfast without feeling the least bit deprived.

When I hit that level of contentment the idea of decluttering my life, buying less and putting away a little more of my money seems simple and obvious.  I don’t feel like I need new clothes, ice cream cones, far away vacations, concert tickets or dinners in restaurants.  Instead I crave time and flexibility.

Contentment Through Desiring Simple Things

I want more time with my SO, I can never seem to get enough, and the flexibility to just take a day off to spend together on impulse.  I want quality time with friends and family without errands nagging at the back of my mind.  I want time and flexibility to pursue project ideas that have sat idle for too long.

Contentment As A Means To Financial Independence

That time and flexibility is exactly what saving buys you once you reach financial independence in my mind.  Not that you would stop working, but that you could do so closer to your own terms and interests.  The contentment also enables you to cut your spending to increase your savings and reach the goal faster.

So I wonder if there’s a way to take this content mindset and extend it.  Take advantage of it for weeks, months, or even years.  It feels happy and good and would be good for me but I don’t know if I can make it last.

As I continue to work towards  my goal of graduating debt-free, feeling content with what I have becomes increasingly important and it will be even more important when I graduate so I don’t fall prey to lifestyle inflation.  Contentment, I think, is a great tool to combat frugal fatigue and burnout, something I’m worried about over the next two years.

Though I’ll be paying for my first year of business school in cash, I have a long way to go before I can be certain that it will be the same for the second.  A little extra saving and a little less temptation to spend would be helpful to me in my graduate student lifestyle.  Overall, I’m committed to keeping debt out of my life, it hinders the freedom, peace and contentment that I’m trying to achieve.

photo by Evgeni Dinev

Reader Questions:

  1. What brings you contentment in your life?
  2. Do you have moments where you appreciate the very basic comforts in your life?
  3. Do you think that feeling helps you be more frugal?
  4. How can I consistently appreciate what I have?

Heaven!

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Each Sunday, I try to post a devotional thought for you to meditate on. Sometimes it will be something out of my own studies and prayers. Other times – like today – it will be from another source.

Earlier today, I posted a great thought on the subject of Hell by James Smith. Please be sure to read that devotion before moving on with this one. Now I will follow that up with a few thoughts about Heaven, also by James Smith, courtesy of Grace Gems:

(James Smith, “HEAVEN!” 1858)

“You have made known to me the path of life; You will fill me with joy in Your presence, with eternal pleasures at Your right hand!” Psalm 16:11

HEAVEN! What is it?

It is . . .
God’s residence,
the Savior’s home,
our Father’s house,
a paradise of pleasure,
a temple of worship, and
the residence of perfect purity and peace!

There . . .
God unveils His glory,
the Savior exhibits His charms,
the angels perform their service, and
the saints are entirely happy with their God.

In Heaven . . .
sin is banished,
holiness is perfected,
life is a continual feast, and
mortality is swallowed up in life!

From Heaven . . .
all pain is banished,
all enemies are excluded, and
all causes of sorrow are shut out!

In Heaven . . .
all our prayers are answered,
all our desires are gratified, and
all our needs are supplied.
There is no weeping, wailing, or wishing there.

In Heaven . . .
our knowledge will be perfect,
our happiness will be abiding,
our pleasures will be ever new.

In Heaven we shall . . .
see Jesus,
be with Jesus, and
be like Jesus, forever!

Who are there?
All tried and tempted followers of Jesus are there.
All doubting and fearing disciples of Jesus are there.
All poor and despised believers are there.
Multitudes, who felt totally unworthy of such glory, and feared they would never reach the place–are there.

All who were chosen by the Father,
all who were redeemed by the Son, and
all who were sanctified by the Holy Spirit–are there.

What do they enjoy there? Who can answer this question–but one who has been there; and he would need a new language to state, and new figures to represent the enjoyments of Heaven. They enjoy rest from their pains–and a full supply of all their needs. They enjoy perfect satisfaction, a fullness of joy, and pleasure forevermore. They see all that they believed, realize all that they hoped for, and possess all that they loved. They have . . .
health–without sickness;
pleasure–without pain;
and holiness–without sin.
Every sense is gratified, every power is pleasurably employed–and they are perfectly and perpetually happy!

O Heaven, in you there is . . .
no tempting devil,
no ensnaring world,
no indwelling corruption;
no doubts, fears, or misgivings!
And best of all, there is no sin!

O Heaven, in you I shall see my God, possess my Savior, and enjoy the fullness of the Holy Spirit! O my God, in Heaven I shall be satisfied–for I shall be with You, serving and enjoying You without weariness or cessation!

Who will yet get to Heaven? Who? Ah, perhaps many we little think of! We shall miss many whom we expected to find there–and find many whom we never expected would reach that glorious place!

Who will go to Heaven? That poor man who is striving against sin, mourning over corruption, and loathing himself before God. That poor woman, who sighs because she sins, pants for perfect holiness, and clings to the cross of Jesus.

Do you see that poor soul on his knees, confessing his transgressions, pleading for pardon, and seeking grace to sanctify his nature–he will go to Heaven. Do you see that lowly Christian, who is visiting the sick, pointing sufferers to the cross, and trying to alleviate human woe, out of love to Jesus–he will go to Heaven.

Do you see that Sunday School teacher, who, after a hard week’s work, is regularly in his class, speaking loving words, in tender tones, to win the little ones for the Savior–he will go to Heaven. Do you see that preacher who exalts Christ in his ministry, honors the gospel in his life, and travails in birth for souls–he will go to Heaven.

Heaven will be peopled by all who believe in Jesus, love the brethren, and worship God in Spirit and in truth. There will be a numberless multitude there, all deeply indebted to free mercy, washed in the Savior’s blood, and sanctified by the Spirit’s grace!

Reader, there is a way–but only one way to Heaven! Only those found in that way will ever reach it! You yourself, may be within an hour or two of either Heaven or Hell–do you know which? If called away suddenly–to which would you go? You have a Heaven to obtain, or a Hell to endure–to all eternity! Which shall it be? O that you were wise, that you properly realized this, that you would consider your latter end!

Heaven with all its glories–or Hell with all its horrors–must be your eternal portion! If you despise the Savior, make light of the Gospel, and neglect God’s great salvation–then Hell, an eternal Hell, with all its unspeakable horrors–is your portion!

“No eye has seen, no ear has heard, and no mind has imagined–what God has prepared for those who love Him!” 1 Corinthians 2:9

photo by plindberg

***

I pray that these two posts have given you a lot to think about concerning the destination of your soul upon death! Hebrews 9:27-28 tells us:

And inasmuch as it is appointed for men to die once and after this comes judgment, so Christ also, having been offered once to bear the sins of many, will appear a second time for salvation without reference to sin, to those who eagerly await Him.

There will be no purgatory, no reincarnation, and no second chances.

There will also be no excuses! Hebrews 2:1-3a says:

For this reason we must pay much closer attention to what we have heard, so that we do not drift away from it. For if the word spoken through angels proved unalterable, and every transgression and disobedience received a just penalty, how will we escape if we neglect so great a salvation?

So please, “Seek the LORD while He may be found; call upon Him while He is near.” ~ Isaiah 55:6

If you have any questions about the subject, read about the Gospel or contact me.

Hell

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Each Sunday, I try to post a devotional thought for you to meditate on. Sometimes it will be something out of my own studies and prayers. Other times – like today – it will be from another source.

Today, I am posting a great thought  from James Smith, courtesy of Grace Gems:

HELL!

James Smith, 1858

“The rich man also died and was buried. In Hell, where he was in torment, he looked up and saw Abraham far away, with Lazarus by his side. So he called to him: Father Abraham, have pity on me and send Lazarus to dip the tip of his finger in water and cool my tongue, because I am in agony in this fire!” Luke 16:22-24

What is it? It is God’s great prison, where His criminals are confined. It is the place of punishment–where the wages of sin are paid. It is the house of despair, the residence of desperation, the dwelling-place of the worm that never dies. It is called the lake of fire, burning with brimstone.

It is a place of terrible torture, dreadful agony, and soul-racking remorse. Hope never enters there. Repose is never enjoyed there. Light never shines there. But all is pain, gloom, restless agony, and indescribable torment! There is weeping, wailing, and gnashing of teeth–forever!

Who are there? The rich man, at whose gate Lazarus lay, is there. Judas, who betrayed Jesus, is there. Cain, who slew his brother, is there. Demas, who preferred the world to Christ, is there. The covetous and thieves are there! The immoral and liars are there! The proud and vain are there!

All who made light of the Gospel are there! All who neglected the great salvation are there! All who worshiped the Roman beast are there! And they are all “tormented with fire and brimstone in the presence of the holy angels, and in the presence of the Lamb! The smoke of their torment ascends up forever and ever–and they have no rest day nor night!”

Many perhaps whom you have known are there! Some of our relations even may be there! Old friends of ours may be there. Some who lived in the same street, met in the same place of worship, and whom we once hoped to meet in Heaven–are there!

Who are there? Why, we were nearly there ourselves! We lay at the entrance of Hell! We were within a few inches of Hell! A slight accident, a stroke, or a disease–would have sent us there. Yes–but for free and sovereign grace–WE would have been in Hell!

“Nothing impure will ever enter it, nor will anyone who does what is shameful or deceitful, but only those whose names are written in the Lamb’s book of life!” Revelation 21:27

“Outside are the dogs, the sorcerers, the sexually immoral, the murderers, the idolaters, and everyone who loves and practices lying!” Revelation 22:15

HELL! What do they suffer there? No tongue can tell. No pen can write; no heart can conceive–what lost souls suffer in Hell! Who can tell what the unmixed wrath, the fiery indignation, the endless curse of Almighty God is? Who can set forth what sin deserves, and what is the obstinate sinner’s due?

They weep, they wail, they gnash their teeth. They are tormented in eternal flames. In every member of the body, in every power of the soul–the lost in Hell will suffer. Memory, conscience, and the imagination–will especially increase their agonies! And hopeless despair will render their doom indescribably dreadful!

What do they suffer in Hell? Tell! O tell me–what God can justly inflict, what an immortal man can bear, what the threatenings of the violated law require, and how devils can add to the torments of lost souls–and I will tell you what they may suffer in Hell!

But, O! may you never know in your own experience what lost souls have to endure, and endure forever! Could we but lift the veil that conceals that awful place from our view, and see but for five minutes the agonies of those in Hell–we would never forget the sight! Our flesh would tremble, our hair would stand up on our heads, and our souls would be paralyzed with horror!

HELL! Who will yet go to Hell? Who? Perhaps the reader of these lines! Who? ah, perhaps many of whom we have now no suspicion! Will any of our children go there? Will any of our brothers or sisters go there? Will any of the members of the church go there? Will any of this congregation go there?

Who will go there? All liars shall have their part in the lake that burns with brimstone and fire. All swearers, all drunkards–will find a place set apart in Hell for them. All immoral people; all covetous and dishonest people–all will find a place in Hell prepared for them.

Who will go to Hell? All who live and die impenitent; “for unless you repent–you shall all likewise perish!” All unbelievers; for “he who believes not, shall be damned!” All who are in their natural state; for “unless a man is born again–he cannot enter into the kingdom of God.”

Without faith in Christ, and repentance toward God; without love to God and man, the proof and evidence of the new birth; without union to Christ, and the possession of the Spirit of Christ–there is no escaping the wrath to come–the person must go to Hell! O solemn consideration! Let a man therefore examine himself, whether he is in the faith; let each man and woman prove their own selves, and see if Christ is in them.

HELL! How may we escape it? Only by fleeing to Jesus, by believing in Jesus, and receiving the Spirit of Jesus. No one can save us but Jesus, for there is no other name under Heaven given among men, whereby we can be saved.

Jesus has done all that is necessary to save souls from Hell, and he is ready to put on our account–what he has done to us; whenever we go to him, plead with him, trust in him, and commit our souls to him. We need not go to Hell, for Jesus is both able and willing to save us; and yet we must go to Hell, unless we apply to him, to be saved by him.

As therefore Hell is so dreadful; as the punishments of Hell are eternal; as once lost, we are lost irrecoverably–as no one can save us but Jesus–and as Jesus will only save those who make personal application to him–let us at once, with all our hearts and souls, apply to Christ!

“Behold! now is the accepted time. Behold! now is the day of salvation.” Let us then “Seek the Lord while he may be found; call on him while he is near. Let the wicked forsake his way and the evil man his thoughts. Let him turn to the Lord, and he will have mercy on him, and to our God, for he will freely pardon!” Isaiah 55:6-7

photo by Stacirl

Once you are done thinking about what you just read here, be sure to read a summary of what God’s word says about Heaven, by James Smith.