Yes, you can apply for a loan for someone else, but you will be liable to repay the loan in full, as your name will be on the contract. Where possible, you should allow your relative to apply for the loan directly to avoid being implicated.
You could find yourself in a situation whereby a close friend or relative needs some fast financial assistance, but is unable to apply obtain a payday loan for bad credit reasons or due to a lack of income – so you get roped into helping them. But you need to manage this carefully and avoid being liable for the payments, which are usually quite high with payday loans and other loans for short term purposes.
- You can take out a loan on a relative’s behalf, but this leaves you with a commitment to pay it back in full. Essentially, it transfers the commitment over to you.
- Bankrate have found that 21% of Americans have cosigned for a financial product like a loan or rental, in order to assist a loved one.
- You may get a loan on somebody else’s behalf if they are struggling to secure one given their financial history or current situation.
- 35% of Americans who have financially assisted loved ones – through getting a loan on their behalf or in other ways – have incurred damage, whether that be to their relationship or financial situation.
Why Would I Apply For a Loan On Behalf Of Someone Else?
There are several reasons why you might consider applying for a loan on someone else’s behalf. For instance, a family member or friend may already have a personal loan and want to consolidate their debts, but cannot due to their credit score.
It could be because a family member or friend cannot get obtain credit at all due to previous financial problems that still impact their credit score.
Someone who’re recently moved to the US and doesn’t have enough of a credit record to take out a loan or credit card, or doesn’t have a permanent address in the US or isn’t a registered US citizen.
Can I Apply For a Loan For Someone Else?
Yes, you can get a loan for someone else, but it’s crucial that you remember that you are liable to repay the loan, so only do take one out if you know you’ll be able to repay it when the repayment is due, and make sure you do not borrow money than you will be able to afford to pay back.
The number one thing you cannot forget is that if you take the loan out, you will be the one who is responsible for repaying the loan back in full, plus interest.
Furthermore, you will have to deal with the loan whilst it is ongoing.
Despite the fact you are taking the loan out for your friend or family member, you are making the agreement with the lender in your name, so it is you and only you, that the legal responsibility will fall on.
Is It Illegal To Get a Loan For Someone Else?
It isn’t illegal to take out a loan for someone else, because as far as the lender is concerned, it’ll be your name on the loan agreement, and you will be responsible for repaying the loan. So any consequences of missing a payment will be on you.
However, you may need to speak to the lender to verify your identity and income, so you should be preferred to do this, even if borrowing for a relative.
Why Would a Relative Ask Me To Take Out A Loan For Them?
Before taking out a loan on behalf of a relative, you should really question why it is they are wanting to take out a loan. You should not be afraid to find this out, it is your money on the line anyway.
If they are asking you for the loan due to their bad credit history, you should consider whether they will be able to repay you at all.
Additionally, Bankrate found that about 35% of Americans who have financially assisted loved ones have been negatively impacted, such as through damage to their credit record, and/or their relationship.
Remember, just like you should only consider taking out a loan if you really need it, so too your loved ones should do the same. You should only consider helping them in this way if they truly need it.
What Are The Risks Of Borrowing For Someone Else?
If you miss a repayment or cannot repay the loan, your credit record will get damaged, rather than the person’s record you are borrowing on behalf of.
This is because you are legally responsible for repaying the debt even if you are borrowing on behalf of someone else.
To avoid this, arrange for them to send you enough money to cover the loan repayment each month, otherwise you will have to pay it yourself.
Instead of taking out a payday loan on someone else’s behalf, it may be a better idea to lend them money personally. This way you will not be liable with a lender, and can avoid interest repayments. If you trust this relative then this could be an easier way of helping to settle any financial issues.
Alternatively, your relative or close friend could consider obtaining some financial assistance from their employer. Often, companies have financial assistance schemes in place for their employees, such as an advance on their paycheck, so it may be worth telling them to check whether this is an option for them at their place of work.