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.
My parents co-signed my very first small loan. I had asked them if they would lend me a small amount of money for my first car and they suggested that we get a loan from the bank instead so I could build credit. It ended up working out find but of course I am their daughter and also it was such a small amount that they could have easily paid it off without there being any hardship on their part.
That said, I know they would never co-sign a loan for friends or even most family members. I was very surprised when they suggested the idea to me! I very much agree that if you feel the need to help someone out you should find a way to give them money or help with no strings attached. Even a loan can really mess relationships up due to resentment etc. It can be so frustrating to watch someone that you’ve loaned money to continue to pay for cable/ buy an iphone/ take a vacation.
We have close family members that have asked to borrow money on occasion and while it really tugs on our heart strings at times, we have decided that we will no longer lend them money because we don’t agree with their spending habits. Why would I lend money to someone that drives newer vehicles than myself, works less than ourselves, indulge their children more than we feel necessary etc. We felt resentment about these things and then I just decided that as long as they are not using any of my money, it is none of my business how they spend their money and that is when we made the decision to make a hard and fast rule not to lend them money – no matter what the excuse was. Other family members had been venting to myself about the same issue as well which was stressful so I told them what we had decided and that perhaps they should consider cutting them off as well and the stressful, venting phone calls stopped. I have no idea whether they stopped lending money or not- but they stopped complaining to me about it. 🙂
Joe Plemon says
My wife and I also have a hard and fast policy about lending money. We don’t do it. For anyone. There is way too much to lose (the relationship) and very little to gain. We figure if we have the money to lend, and the person is really trying to make ends meet, we can opt to give them some or part of the money. If they are not managing their money well, our answer is, “Sorry, but we have a policy to not lend money.”
Money Wise Pastor says
My wife and I sponsored a refugee family from Bosnia in the mid-90’s. We helped them buy a car, which cost $1,000. The seller agreed to let them pay $100 a month for 10 months. We thought that was a great deal for them!
Another refugee family they knew had bought a new car with a loan that their sponsor co-signed for, so then our family asked us if we’d co-sign for them so they could get a new car. We told them no, because we were in no position, and had no desire, to assume someone else’s debt.
They were mad at us at first, but eventually the relationship smoothed out. They did end up buying that car. The car salesman was also from Bosnia and he co-signed the loan for them.
Joe Plemon says
Isn’t it crazy how some people will get mad when others refuse to co-sign? You did the right thing by not co-signing for a new car, and I am glad that your refugee family got over their anger and the relationship smoothed out. Interesting that a car salesman co-signed the loan for the new car. I am not sure I ever heard of that happening before.
About 20 years ago, when I was in college, a college admin who I greatly admired co-signed a loan for me when my parents wouldn’t help. I’m forever greatful she had faith in me. I paid the loan off early. I often think of Patricia and hope she knows how much she helped me.
Joe Plemon says
I am glad that it worked out for you and for the college admin (Patricia). If you are hoping that she knows how much she helped you, why don’t you contact her and tell her. I bet she would appreciate it.
Money Wise Pastor says
What compounded the problem was the language barrier. This family we were helping didn’t speak English much at all – they were learning. So we had to do a lot through an interpreter, pictures, and hand gestures. It sounded like the salesman co-signed for several other refugee families. I guess he figured the commission he got on the sale was worth the risk to him.
Joe Plemon says
Wow. I hadn’t heard the FTC stat that 75% of co-signed loans end up back with the co-signer. It seems that the writer of Proverbs knew what he was talking about!
Bob Snyder says
That was from Jean Chatzky’s book, Money Rules.
Joe Plemon says
Thanks, Bob, for the info.
I completely agree with this article and it is exactly what I needed to see right now. Not that I am in the position of co-signing at the moment, but I have been put in this position many times before and I am constantly trying to figure out how to best help people without hindering myself, and also even hindering them even more. I don’t want people to be dependent on me, but I need to find the balance of helping people. I would rather teach a man to fish than give a man a fish. Sometimes that doesn’t work out and you have to discern when you truly need to give, and when giving won’t help the person at all.
Joe Plemon says
Many people get fixated on their supposed need for a co-signer and therefore do not understand when people say “no”. At least they don’t understand at the moment, but maybe they will get it later. Have you read the book “Boundaries” by Cloud and Townsend? It is a very liberating books, written from a Christian perspective, on how and when to say “no”.
What advice do you have for someone who does need a cosigner? I have a steady job and good credit, but I was surprised that my landlord still asked for a cosigner because my credit history is not very long. Lenders seem to be especially cautious these days.
Joe Plemon says
How many landlords have you spoken to who required a co-signer? I understand that they are cautious, but there has to be a way to find one who doesn’t need a co-signer. What if you offered an extra month’s deposit, or agreed to have the payment directly withdrawn from your account?
Readers: any other thoughts that could help Alisha?
The apartments that I’ve seen that did not need a cosigner were not in as good condition as the place where I currently rent. In the future, I will definitely ask about paying more upfront or taking the rent directly from my account. I think that being able to have references from previous landlords in the local area (I moved to a different state for my current job) will help as well. After I’ve lived here for a year I plan to ask for the cosigner to be taken off from my lease.
Joe Plemon says
Thanks for filling in the blanks. It sounds like, if your current job requires you to move again in the future, you may be facing the same dilemma elsewhere. Asking for the cosigner to be taken off your lease after you have been there a year is a good idea.
My mom co-signed on a truck loan for me after I had just dropped out of highschool. I defaulted, of course, and she got stuck with a huge problem. (I really was selfish and self-indulgent as a kid). Years later she did what you suggested and when I needed another small loan, she directly gave me the money as an outright gift. That really did something to me. Even though she said I didn’t need to pay her back, it’s a gift, I was so moved that I did save up and eventually pay her back (I was also older, less selfish, and realized how great it was to get a loan not from a bank). If you can give, you should just give; but never co-sign or you might suffer what my mom did (I still feel bad about that whoel default thing 🙁 )
Joe Plemon says
We all make financial messes in some way or other. Some learn and go forward. Others keep making the same mistakes. Fortunately, you learned, and are better for it.
This article is so timely. We had just been asked to co-sign a loan. We are rebuilding savings from unemployment. After more prayer, we felt at peace to say “no”. If we had the $$ we’d consider a gift, but right now we still need our 6-12 months living expense emergency fund. Thank you for the Godly counsel.
Joe Plemon says
I am glad the article helped, and that it was timely. Another one of God’s “coincidences”?
Money Wise Pastor says
I am a landlord, so I can sympathize with Alisha’s situation. I agree with Joe’s suggestion about offering an additional month’s worth of rent or deposit up-front. And the direct deposit might help too.
I have had some wonderful experiences with tenants who didn’t look so great on paper due to past credit issues or no credit history, but we were able to find a way to make it work.
Ironically, the fair housing laws complicate things by requiring landlords to treat everybody according to the same minimum qualification standard.
This can make it hard for a landlord to bend his/her own rules or be willing to “take a chance” on one person if they feel in their gut or spirit that they should.
For example, I have a friend who had a tenant who had cancer, couldn’t work, and couldn’t pay the rent. He wanted to forgive her debt and allow her to live there rent-free for a while, but could not due to the law. He ended up finding a way to donate money to a church or nonprofit which then helped the lady pay her rent.
Joe Plemon says
Thanks for sharing these thoughts from the landlord’s perspective. I had no idea of the implications of the fair housing laws. I suppose, legally, the only way anything can be fair is to paint everyone with the same brush. I appreciate how your friend went outside the box to help a needy tenant.
I believe that discernment is key. As a recent college graduate, I can attest to the fact that obtaining educational loans without a co-signer is no easy task.
My parents were not in the position to help me in any way; therefore, my grandparents were gracious enough to co-sign some very hefty loans for me. This not only enabled me to pay the ever-increasing educational costs, but it also taught me the value of my education. I was motivated to not just complete my bachelor’s degree; but rather, I strove to work hard in all of my classes – they weren’t free after all.
I am now paying back my loans, and will most likely be doing so for the next 8 years. As I make life decisions, I take into consideration my monthly loan payments, as I am not the only one affected by my financial responsibility. I am also more motivated to donate to students trying to put themselves through college.
While I work hard to make sure I am paying back loans on time, I have also recently seen my grandparents in financial stress for co-signing a non-educational loan for my cousin.
It seems that this type of decision is circumstantial and clearly a decision that should not be taken lightly. I am forever grateful for the trust my grandparents had in me; but I have also seen firsthand the distress endured by them for only showing that equal amount of trust to my cousin.
Joe Plemon says
Yes, discernment is critical. But, when co-signing a loan, how does one KNOW that the borrower will (like you) work hard and make those payments? I imagine your grandparents also had high expectations of your cousin, but now they are in financial stress because of co-signing. I hope the relationship between your grandparents and your cousin has not been destroyed, because that is part of the risk one takes when co-signing.
Oh no! I co-signed for two loans for my niece for college. I wish tht I had counsled with God and the Bible before doing so. Now my niece is graduating from college in two weeks and with the current climate of the job market, may not be able to get the job or pay she wanted! Please pray for me as I am now worried sick about this ruining my relationship with me niece and my husband.
Joe Plemon says
You are going to have to try to make the best out of this situation. I think that you (and your husband) should sit down and talk with your niece about her ability to pay. If you are going to have to start making her payments, it would be better to make them when they come due instead of waiting until the lender starts bugging you and your credit rating is already dinged. Hopefully, she will find work and make her payments, but clear communication now is critical.
Hi I don’t have the greatest credit, I am making amends to fix what I have broken, but is it wise to have my wife co-sign for me to get a car?
Joe Plemon says
Making amends to fix what you have broken is an admirable thing to do. I applaud you!
Co-signing for a spouse isn’t quite the same as co-signing for a friend or even a relative. Still, if your wife has good enough credit to co-sign, would it be possible for her to take out the car loan in her own name? You can always title the car in both of your names no matter who signs the loan. Of course, the ideal would be to save up and pay cash for a car, even if it is a clunker, then continue to pay yourself until you can upgrade that clunker to a better car (with cash, of course). That way you don’t need a loan and you break out of the debt mentality.
I wish I had taken the time to pray and really listen to the Holy Spirit to get revelation knowledge and understanding before considering co-signing for a friend. Unfortunately, I was foolish at the time I co-signed for a friend’s educational loan several years ago. Yes, I had “good intentions” and had a blind trust that she would pay it back.
Not only did my friend default on the loan (although they were for medical reasons), I ended up paying some of it (which I could not continue due to financial challenges); the creditors have been hounding me since they haven’t had success getting in touch with her; she has not returned my phone calls, emails, or letters; and this has put a burden/oppression on my family and me.
This is probably one of the biggest mistakes I’ve made and, by God’s grace, will not repeat again. I have since repented for my past foolishness and also try not to stand condemned, for God’s word says there is now no condemnation for those who are in Christ Jesus.
I’m praying for God’s wisdom and deliverance. I know the Lord is the only unlimited, unfailing source of my supply. So if I end up having to pay, He will make a way. He’s the one who teaches us to prosper and directs us in the way we should go. And He shall supply all our need according to His riches in glory by Christ Jesus.
I was given an “offer” to do a settlement that would get me off as a co-signer. However, it was still a hefty sum, and I wasn’t able to go for it (yet). My desire, though, is for this ENTIRE loan to be paid in full, forgiven, cancelled, dissolved, or cast into the sea. In Jesus’ name!
My mind is now renewed in Christ Jesus, and I believe my family and I will likewise agree to live with a no co-signing policy from now on.
Thank you for spreading God’s Word regarding co-signing. Please add us to your prayer list. 🙂
Joe Plemon says
Wow. It is amazing how good intentions can turn into nightmares. You learned a tough lesson, but I am sure you will never repeat it. As for your struggle with condemnation, you are absolutely right in saying there is no condemnation for those who are in Christ Jesus. And yes, I will remember you in prayer. It seems as if this debt is going to stay with you for some time.
I have learned my own lesson the hard way like JBR. My husband and I co-signed a huge loan with Pastor that was meant to be repaid in two weeks. Three and a half years later, only two part payments have been made. We generally would not co-sign a loan for any one but we considered this situation to be different because we were dealing with a pastor and they had promised to pay in just two weeks. Needless to say that our relationship with the pastor has been damaged and we are almost giving up hope that the rest of the loan will be paid. I deeply regret it and the fact that it involves a pastor also affected my faith for some time but I thank God that I he has shown me that the situation does not make Him to be a liar and doesn’t change the fact that He is God. The lesson here is to make no exception to the rule of “no co-signing”. No matter who needs it!
Joe Plemon says
OL — Thanks for sharing a painful story. Although you have been through (and continue to go through) a nightmare experience, telling others about it may help them avoid the same travail.
My husband felt so strongly that he should give my step-son a “chance” after he got a 2.3 GPA his first year in college, that he co-signed a student loan for a school we could not afford and lied to me about it. Turns out that he had lied about much more with our finances. And we simply could not afford this “solution”. When confronted about it he believed that since his intentions were honorable, then the means were too. This is coming from a Christian man studying Crown Financial and an MBA! We had previously agreed that co-signing loans wa something we would not do. My suggestion to Believers is to keep any decision before the Lord and ask Him to expose any wrong behavior, attitudes, patterns, justifications and generational strongholds that would prevent you from making a wise, honorable decision in the name of Jesus. Also ask the Lord to help your unbelief if you are having trouble trusting the Lord to work out His plan even if its different from yours. And if you are having to pay a defaulted loan … forgive and insist the person stop whatever behavior that is preventing them from paying the loan or work on a solution if something not in their control prevented them from paying.
How about pledges? Our church was recently “challenged” to pledge for one year in order to pay for a new pastor to come to our church. Our current pastor has always worked full-time (in corporate sector) and is resigning from his pastor position. Our small church body pays salary to pastor’s daughter (children’s ministry) and pastor’s wife (office)..
Danny Williams says
Many years ago, I co-signed for a fellow airmen who never had borrowed before, thus he was denied credit for a car loan. I co-signed his note and never regretted doing so. I helped a young man in desperate need of a vehicle. He never missed a payment! I would do it again if need be…to me it is ALL about character of the individual.
Sharon L Jenkins says
My 30yr old son was living with us and he had no car. He had a job but the previous cars were stolen or taken away. My husband and I would get up and hour early to take him to work. Finally my husband was so tired of taking him to work that he nagged me everyday and it was getting the best of me. I was so drained. My son and I went down to the Toyota dealership and he picked out a car.. He told me that he had the down payment for the car but needed a co-signer. He sore to me that he could make the payments. At that point all I wanted to do was make my husband happy. I never read the contract. A year later after getting so many phone calls from the financial co about late payments I found out that I was the buyer of the car and my son was the co-payer. I felt really stupid. He would not make the payments on time and the car was taken way once. He got it back. It has been a bad rollercoaster ride for me. I will never lead my name ever again. He owes $10,000 on the car and he will not refinance because his credit is so bad. I wished I had of listened to my heart and not my feelings.
Jameson miller says
I believe it is important for these verses to be taken in full context. Many of these refer to co signing on debts for strangers; or for putting yourself into a situation that you are putting up collateral on someone else’s behalf.
There are many reasons bank, or other lender, would require a co signer. One being a limited credit history.
When I needed a car a semester before my college graduation, my father agreed to co-sign on a car loan for me. I had a good paying job already and had a job lined up with that same company subsequent to my graduation. Luckily for me I was able to get through school without having to take out any loans and never owned a credit card. So when I was 22 trying to buy a car I had no credit history. The car I wanted was affordable and I demonstarted sufficient cash flow from working to make the payments on the vehicle. However because I had no credit history the bank required some one who did have a credit history; not because I didn’t have the ability to repay.
Well I honored my father and mother by paying that car loan off by self and that was enough to begin establishing myself some credit for the future.
While generally, I agree it isn’t wise to co sign on a loan for people. But I also believe there are times when it is okay to co sign on behalf of another
No where in the bible does it say that what my parents did for me was wrong or sinful. In fact in this situation the collateral was the car, if I quit paying the loan they would have repossessed the car, not my parents house. So I disagree with the full context of this article, because I believe the situation varies depending on the circumstances. To flat out saying co-signing on another persons debt is sinful, wrong, or unwise is taking these scriptures out of context a bit. With that said, if you question whether that person could re pay the debt, or they have a history of not re paying debts then it’s probably is unwise to put your self in that situation taking unnecessary risk.
On the flip side if you operate a business with a partner, many times banks require the partners to sign as co-signore on any debt that company would have. Again I don’t see a problem with that scenario either so long as you have no doubt in your mind about your business partner and there ability to service the same debt.
At the end of the day; use your head folks. If it’s a bad deal then its a bad deal! But there is nothing wrong with what my parents did by co signing on a car loan with me, and none of the above bible passage suggest otherwise.
Bob at MoreMoneyThanMonth.com says
“In fact in this situation the collateral was the car, if I quit paying the loan they would have repossessed the car, not my parents house.”
That is true. But I would add that is only part of the repercussions. At that point your parents will have a reposession on their credit report the same as you. Second, if the loan company sells the repossessed vehicle for significantly less than the remaining loan value (which often happens) they will likely not only sue you for the difference but they will very likely sue your parents as well.
There are many things in the scriptures that are not necessarily sin, but that God clearly indicates are unwise. Debt is one of those things.
I am glad things worked out ok in your case,but there are too many instances where relationships are damaged, many times for years, when these deals don’t work out as planned. To me that isn’t a risk I want to take.
Jameson miller says
The FTC reports 75% of co signed loans end up being paid by the co signer?
Where is that published? Please cite the source of that hog wash.
I’m a bank auditor and that has not been my experience when examining loan files at the community banks I audit. In fact you’d be surprised how few loans banks have these days that aren’t generally paying as agreed
My husband’s daughter and son-in-law had a business that was experiencing some financial snags. They asked us for a $20,000. loan to get them through the rough time. Mind you, we are a senior couple, on only my husband’s social security & small retirement income with a very modest savings. My husband and I discussed it and determined that if we were going to loan the money, we’d have to accept it if we never received the payment, without any animosity. We thought of it as an investment that would benefit not only his daughter and her husband, but his other daughter, as she worked there at the time. Afterward we learned that the relationship between the family members was strained and the one daughter left working there. We also learned that the financial difficulties with the business was not merely a bump in the road, but an on-going problem. The daughter and son-in-law were grateful but it has been about 4 years now and they have never paid a cent toward the loan and the other daughter seems resentful and has little communication with us. Another daughter contacted us asking us to co-sign for her son and we refused. We are persona-non-Grata with most of the family and somehow they’ve all managed without our further financial assistance. We see so many mistakes we made in not asking more questions and how our idea of the relationships between the family members who were working together was so mistaken. It has been a real-eye-opener for us.
cathy u says
I hope it is not too late to post a question…..I have co signed for my son twice now. We had lost his dad, my children’s dad, to a farm accident and alcohol was involved. He told his son to ‘never’ drink; it never did him any favors. Well, family encouragement and he drank with grandparents and family; becoming like his father. He’s a sweet kid, but….he has the drinking problem now too. His first vehicle; alcohol related; totalled out car. 2nd vehicle co signed, he just wrecked too, and uncertain if alcohol related, but he has had a small, very small school loan he never paid off., so that’s why his credit has been bad for starts. Personally, I don’t want to co sign anymore. I’ve been very fortunate and he’s made the payments with this last vehicle, but I had to make some of his first vehicle ones. He is my son….I want to do what is best! I would like him to go with to a car auction; buy something he can pay for right now, and use it til he can afford to get something better down the line. I just out of curosity decided to google, “What does the Bible say about co signing?” And God let me land on this site…. I’ve cried so much about this., cuz I’m afraid he’ll turn totally away from me, if I don’t co sign. I’m so afraid the walk he’s been taking drawing closer to God, will only make him resent me and decide to hang with the old crowd, or that type, and then I’ll worry even more so. He ‘does’ not do well with finances and trusts everyone., so he’s been swindled out of money before. “HELP”
Jane G says
My sin is in college and applied too late for campus housing. He now needs an apartment. The rental market is hot and favors the landlords in a college town. Everyone requires a cosigner at his age! My husband and I greatly disagree on this. Its been a long time ago but when we first rented one of our parents signed for is to have an apartment. What are your thoughts in this situation?
What about parent signing surety for their child for a study loan?