MIAMI (CBS4) -This years’ holiday shopping season is expected to be a record-breaker, with online spending approaching $25 billion dollars so far.

With all that spending, consumers may be tempted to borrowing money, or help a friend borrow money by cosigning a loan for them.

It can be hard to say no to a friend or family member, but it is important to understand all the potential consequences before agreeing to cosign a loan.

Nicole Navretil didn’t realize what could happen when she agreed to help a friend out by co-signing a student loan.

“Never in a million years did I dream that somebody that I trusted would move away, stop making payments, and not even bother to return my phone calls,” said Navretil.

Creditors came after her, garnishing her tax returns and ruining her credit.

“I didn’t foresee there being a problem with it,” she lamented.

But there can be big problems if the loan applicant doesn’t meet their obligations.

“You need to keep in mind that you’re being asked to take on a risk that a professional lender will not take,” Malini Mithal of the Federal Trade Commission said.

Before signing anything, you need to ask yourself if you are capable of handling the payments yourself in case there is a default.

“If you don’t have the funds to repay the loan, they can you to court,” said Mithal. “They can seize your possessions. They can garner your wages. They can even add on late fees and attorneys fees to the cost of the loan.”

It is important to realize that even if all the payments are made on time, your credit rating is still affected.

“It will look like you have a larger amount of obligations than you really have for yourself and it might hurt your ability to take on credit that you need for yourself,” explained Mithhal.

Whether it is a car loan or a mortgage, it is suggested you have a frank and open financial conversation that covers a lot of bases before agreeing to anything.

“I would ask them to provide you with a copy of their credit report so you can see if they are meeting their other loan obligations. And second, I would absolutely ask them what kind of income they’re currently making and what kind of stability do they have with their employer,” Credit expert John Ulzheimer added.

If you decide to go forward, you can ask the lender to keep you in the loop. “You can also ask the lender to let you know any time the borrower defaults on any kind of payment, even one payment so you are not taken by surprise and you can deal with the situation as it’s happening as opposed to when the entire loan goes into default,” said Mithal.

To learn more about cosigning loans, click here to visit the FTC’s website.


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