Co-signing: What the Bible SaysWhereas the bible never uses the term “co-signing”, there are several verses on money and it gives plenty of advice about assuming responsibility for another person’s loan. Most of this advice, appropriately, comes from the Book of Proverbs … a book of wisdom. I would categorize these passages under the following headings:
Co-signing a loan is a bad idea
One who lacks sense gives a pledge and puts up security in the presence of his neighbor. Proverbs 17:18 (ESV) Be not one of those who give pledges, who put up security for debts. If you have nothing with which to pay, why should your bed be taken from under you? Proverbs 22:26,27 (ESV) Whoever puts up security for a stranger will surely suffer harm, but he who hates striking hands in pledge is secure. Proverbs 11:15 (ESV)Enough said? We learn from these three cosigning bible verses that the co-signer lacks sense for good reason: he puts his household belongings (his bed) at risk and will surely suffer harm. However, one who hates the idea of co-signing is secure.
One who co-signs for others makes himself a poor risk.
Take a man’s garment when he has put up security for a stranger, and hold it in pledge when he puts up security for foreigners. Proverbs 20:16 (ESV)Co-signing is bad enough, but one who is so reckless as to co-sign for strangers and foreigners makes himself a bad risk. Lenders will require more collateral (even his clothing) for whatever credit he is requesting.
One who has co-signed should request to be out of it.
My son, if you have put up security for your neighbor, have given your pledge for a stranger, if you are snared in the words of your mouth, caught in the words of your mouth, then do this, my son, and save yourself, for you have come into the hand of your neighbor: go, hasten, and plead urgently with your neighbor. Give your eyes no sleep and your eyelids no slumber; save yourself like a gazelle from the hand of the hunter, like a bird from the hand of the fowler. Proverbs 6:1-5 (ESV)Even after co-signing a loan, the co-signer, realizing how he has jeopardized his own financial well being, should immediately ask to have the contract voided.
Why do Christians co-sign?If co-signing is clearly frowned upon in scripture, why do Christians do so anyway? My guess is that they do so with the best of intentions. After all, the Bible admonishes us to care for the downtrodden, to give generously to the poor and help those who can’t help themselves. Therefore, it seems only right to help a struggling relative or friend get that car loan or mortgage or even a payday loan. “After all”, we think, “if I demonstrate my confidence in this person, he will surely respond to that confidence by stepping up and making his payments.”
The hard data on co-signing loans for othersIn 2016 there was a survey done of over 2,000 respondents who had co-signed a loan for others. Nearly 40% of them ended up being fully or partially liable and had to actually pay because the co-signer wasn’t able to. More noteworthy stats from that survey:
- Credit damage: 28% experienced a drop in their credit score because the person they co-signed for paid late or not at all.
- Hurt relationships: 26% of respondents said the co-signing experience damaged the relationship with the person they co-signed for.
Why is the bible so negative about co-signing loans?Solomon, who is credited with writing most of the proverbs, was considered a very wise man. Therefore, we should ask why not co-signing is a wise thing to do. I can think of three reasons:
- It doesn’t really help. The reason the person needs a co-signer is because the lender doesn’t have confidence he/she can pay. Could it be that we perpetuate the problems of poor credit or money management issues by co-signing? Wouldn’t wisdom tell us that saying “no” could be the best help we could offer?
- Co-signing is implicitly agreeing to debt. Whereas the Bible never says “Debt = Sin”, it does portray debt as being a type of bondage. Wise Solomon, who disdained co-signing, also said, “The rich rules over the poor, and the borrower is the slave of the lender.” (Proverbs 22:7) Could it be that he wants us to help others avoid slavery by saying, “no” to their co-signing requests?
- The relationship is jeopardized. If we assume that the lender who originally turned down the loan was correct in doing so, there is a very good chance that the co-signed loan will not get paid. At that point, the one who co-signed will be required to make those payments, which, in most cases, will strain or even break the relationship with the borrower.