“My child, if you have put up security for a friend’s debt or agreed to guarantee the debt of a stranger— if you have trapped yourself by your agreement and are caught by what you said— follow my advice and save yourself, for you have placed yourself at your friend’s mercy. Now swallow your pride; go and beg to have your name erased. Don’t put it off; do it now! Don’t rest until you do. Save yourself like a gazelle escaping from a hunter, like a bird fleeing from a net.” Proverbs 6:1-5 NLT
This proverb falls under an NLT heading of “Lessons for Daily Life.”
I should have paid better attention to this advise from ancient wisdom writers. If you ever wondered how some advice given back in ancient times could possibly guide someone today just keep reading.
I had read this proverb as a youth. There was a problem then. I was broke and could not see myself EVER being in a position of loaning someone money or having a credit rating that would or could guarantee someone else’s loan. And, I didn’t understand this concept of co-signing a loan back then, but I sure do now.
Fact, if you ever co-sign on a loan, you better just be ready to see it as a gift! I’ve done this a few times in my lifetime. One for a young friend and the others for our children. The co-signing on a child’s loan is up to you. One of our child’s was a school loan and we (Robin and I) would have gladly payed it if we could afford it. So, we took on the risk and that loan will be paid off in a couple of months. Whew.
The other one was a rollercoaster ride of stress and could have been a complete financial disaster that my friends could have never foreseen. That co-signed loan went sideways. It grew in size because it was delayed in payment twice. In other words, if the student is still in school or has financial difficulties making the monthly payment after graduation or asks for extensions, the loan payment is paused but keeps accruing interest. This loan ballooned to twice the amount originally borrowed! And, as a co-signer, I was equally on the hook for it. It also deeply effected our credit score (you know the one I didn’t have or care about when I was younger). At one point I had to manage both co-signs in regards to our credit score! Let’s just say it was super stressful and I was praying for my friend to regularly make his payments.
NOTE: Not knowing the consequences did not save me from almost ruining our financial future. And, that’s the point of this proverb really. The warning(s) seems so silly, so far-fetched, futuristic, so old man/Dad-advise when you’re young.
This is one area I beg people to listen to! The phrase, “if you trapped yourself” haunted me for many years because of the one co-signed moment. It was so easy to sign the paperwork. It was so easy to want my friend to get into the school, get a great education and be a hero in his life. None of those feelings were there when we almost could qualify for a home loan!
God was merciful to us and our friend. He was eventually able to make the payments on time and eventually paid off the loan! I was so thrilled, so relieved and so proud of him – all at the same time. Would I do it again? Absolutely not!
People still co-sign for friends thinking they are helping them get the degree, get the car, get the house. I can’t believe it! This proverb is still true, and often it’s still ignored with horrible consequences. I know how hard it is to say “no” as well. The person is so sincere and can prove their need for the loan. They can’t figure out why someone won’t let them “borrow” your credit, your reputation and your future to pay if that loan defaults! And, trust me, it may not be for the amount loaned at the time. It may be double or triple that amount because of delays or missed payments in the life of the loan. If you aren’t in a position to outright GIVE someone the money, DO NOT co-sign for them.
Have you co-signed a friend’s loan? How did it turn out?
PRAYER:
Dad,
Your grace and mercy in this area has been so generous. It turned out well, but I would not have done it if I had known the true cost of co-signing! Thank you for the lessons from proverbs.