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Should I Cosign? Here Is the Truth About What God Says

Hidden Nuggets Series #102: “Do not be one of those who shakes hands in a pledge, one of those who is surety [ cosign ] for debts.” – Proverbs 22:26

If you’ve ever had a situation where a friend or family member asked you to cosign a loan you know it’s a tough spot to be in. On the one hand you want to help. But the idea of being responsible for someone’s debt has you a little squeamish.

cosignSay “No” and it seems like you don’t care.

Say “Yes” and you are opening yourself up to financial risk.

Maybe as you thought think about what to do, you should have considered asking this question: “What does God have to say about it? Would He want me to cosign for this loan?” It may never have occurred to you to seek advice from a higher power.

The truth is God talks a lot about money in the Bible. He even has advice about cosigning which really surprised me when I found it. For anyone, but especially people of faith, His advice is worth listening to.

God’s Advice on Whether to Cosign

The actual word “cosign” isn’t in the Bible unless you are reading a very modern day translation. Instead the word used is “surety.” Surety refers to the act or promise to assume the responsibility for paying the debt of another person if that person doesn’t repay the loan. So cosign = surety…surety = cosign in the Bible. Get it?

When you cosign you become the guarantor of the loan. Usually this is needed when the lender (a bank) has doubts as to whether the borrower will repay the loan. They require a third party (cosigner) – usually someone with solid financial history – to legally enter the contract as a back up to the borrower. This helps the lender reduce their risk of not getting paid back.

In practice it could look like this example: your son wants to buy a new car but has a small down payment, no credit history and little monthly income. The lender sees the risk in granting him a loan based on his limited financial resources. They will loan him the money though if you, as the father, cosign for your son.

If you choose to cosign you will have legally gone into debt. You will be responsible for the loan. Granted, your son is the first person responsible but the lender will come to you if he doesn’t pay. That’s the financial risk you take. But even greater is the relationship risk if the son chooses not to pay.

So what’s the Bible’s take on this? Well God did not have great things to say about cosigning. God told King Solomon to write this Proverbs 22:26:

“Do not be one of those who shakes hands in a pledge, one of those who is surety for debts.”

That’s pretty straightforward and pretty much a command. And I love the imagery of the phrase “one of those.” Reading between the lines you can just see Solomon rolling his eyes as if to say, “Don’t be one of those unfortunate people.”

I actually think King Solomon may have been burnt as a cosigner. The Bible does describe him as the wealthiest man who ever lived. Can’t you see people lining up at his door looking for some financial backing? Perhaps in a moment of weakness he caved, became surety for someone and it backfired. We may never know but it seems at least possible he could be speaking from experience here.

But the Bible is not done yet. It has a lot more to say about this with some specific examples to support God’s command.

But It’s a Friend…It’s Family

When you cosign, it puts you at risk in the present. It is the present risk you take that could have significant long-term consequences. That’s why God warned against it and continued with the warnings. In Proverbs 11:15 we read,

“He who is surety for a stranger will suffer, but one who hates being surety is secure.”

I’ll admit to being a bit confused when I first ran across this proverb. I can’t think of a single scenario where I would cosign a loan for someone I didn’t know. The move makes no sense at all.

Evidently though, Solomon knew people that had done this (or maybe he himself had). He says those who choose to cosign for a stranger will suffer. If you avoid it though you are secure.

“But,” you may be asking, “What if it’s for a friend…a really good friend who I’ve know for years? What is the risk in helping him out?”

God doesn’t think highly of this either. In Proverbs 17:18 we read,

“A man devoid of understanding shakes hands in a pledge, and becomes surety for his friend.”

Devoid of understanding…that’s a great phrase. In other words, you are completely lacking in sense if you cosign on the dotted line even for a friend. Doesn’t matter how long you’ve known them or how close you are. It is to be avoided.

So no cosigning for a stranger. No cosigning for a friend. What about a family member? Did God say anything about that?

I can’t find a direct proverb that speaks to the family member issue. But there is an example that gives us a glimpse of the potential dangers if you choose to cosign for a family member. This can be seen in the Old Testament story of the life of Joseph.

Joseph, Judah and Benjamin

Through a series of remarkable events in Genesis 39-41, Joseph is taken from his home in Canaan as a boy and sold as a slave by his brothers into Egypt. He eventually rises to second in command of the kingdom because of his ability to interpret Pharaoh’s dreams. Joseph is put in charge of preparing Egypt for a massive seven-year famine that God had revealed to him would soon come. The famine was so bad it affected the entire region, even Joseph’s family back in Canaan.

When Joseph’s family ran out of food they went to Egypt. They were brought before Joseph to purchase grain, but they didn’t recognize him because of all the years that had passed since they were separated (and the fact that Joseph looked like and Egyptian, not a Hebrew). Joseph questioned them thoroughly and at one point even accused them of being spies.

To prove they were not spies Joseph told them they could not purchase grain on any future trips unless they brought their younger brother Benjamin with them. Benjamin hadn’t made the first trip because his father Jacob was afraid something would happen to him.

Of course the food they returned home with didn’t last forever. In Genesis 43 Joseph’s brothers are once again faced with the reality of going back to Egypt for more grain. They know they can’t go without Benjamin but Jacob is still reluctant to let him go. So in steps another brother Judah who says this to his father,

“Send the lad with me, and we will arise and go, that we may live and not die, both we and you and also our little ones. I myself will be surety for him; from my hand you shall require him. If I do not bring him back to you and set him before you, then let me bear the blame forever.”

So Jacob allows them to go and Judah is on the hook for his brother Benjamin’s safety.

When they return, Joseph arranges a series of events to test his brothers. Benjamin is accused of stealing Joseph’s personal silver cup (Gen. 44). The punishment for such a crime is lifelong servitude to Joseph. Judah knows if they don’t return home without Benjamin, Jacob will be grief stricken to the point of death. So in Gen. 44:18-34, Judah desperately pleads on Benjamin’s behalf.

In a stunning and beautiful display of self-sacrifice, Judah explains to Joseph that he had become surety for Benjamin and offers himself as a slave to Joseph forever so that Benjamin can go free. Judah’s decision to become surety for his brother Benjamin is about to cost him his freedom…for life!

In the end this story turns out positive. Joseph reveals himself to his brothers and they have a tearful and loving reunion. Judah is not forced into lifelong servitude.

But the risk was still there for Judah. The outcome for Judah could have been drastically different. His surety pledge for a family member would have had great personal consequences.

So in all three instances – stranger, friend or family member – we see the Bible exposing the great risk in choosing to cosign. But what if you already have? What can you do then?

What To Do If You Already Chose to Cosign

Maybe you didn’t know how God felt about cosigning or you chose to ignore the warnings and do it anyway. Now you are regretting the decision. Is there anything that can be done to get out of the mess you are in?

Again we turn to the book of Proverbs for our answer.

For those who have already chosen to cosign, here is the advice God gives through the writer Solomon in Proverbs 6:1-5,

“My son, if you become surety for your friend, if you have shaken hands in pledge for a stranger, you are snared by the words of your mouth; you are taken by the words of your mouth. So do this, my son, and deliver yourself; go and humble yourself; plead with your friend. Give no sleep to your eyes, nor slumber to your eyelids. Deliver yourself like a gazelle from the hand of the hunter, and like a bird from the hand of the fowler.”

How do you get out of the debt you have trapped yourself in? The imagery is pretty clear…you do it quickly, without delay. Take care of it if you can before the day is out. Act like a gazelle fleeing the hunter. Run to your friend and plead with them to release you from the obligation.

Again, don’t wait. The situation isn’t going to improve and resolve itself without conflict.

Now the verse offers hope but if you read between the lines you’ll notice it’s only a little hope. Even though you go to your friend and ask them to release you they are under no obligation to do so. You chose to cosign and that is a legally binding contract. The odds are not in your favor of being released.

Your options are very limited. More than likely you will be stuck in your situation. Your best bet if you’ve already chosen to cosign would be to do one of the following:

  1. Have the borrower refinance and take your name off the loan. This would only be possible if enough time has passed that the borrower’s credit rating or financial situation had improved enough to the point where the bank would no longer require you to cosign.
  1. Find a replacement person to cosign. Good luck with this one. It seems disingenuous to explain to someone that you want off the loan but they should get on it.
  1. Convince (or force) the primary borrower to sell the piece of property (like a car, house) you cosigned for. If they did you could then pay off the loan. If you chose the force route, you might end up in court incurring legal fees.
  1. Pay off the loan amount yourself and never cosign again. As much as you hate it, this is the most likely and quickest scenario to getting out from under your obligation.

The Cosign Conclusion

It’s pretty clear nothing can be gained for you by choosing to cosign. God clearly doesn’t think it’s a good idea and spread warnings throughout the Bible about it. There are simply too many dangers involved and the risk is too great even with someone you know and trust.

We aren’t really helping someone when we cosign. We are helping them get things they shouldn’t have because they don’t have the financial status to do so. That’s why the bank requires a cosigner.

Perhaps it would help our friends and family members more if we chose to help them in other ways instead of cosigning. Maybe sit down with them and help them with their budgeting. Maybe get them some counseling or go with them to attend some financial education classes. Or if you really want to help, just give them the money with no strings attached.

Any of those decisions would be better than to cosign. You just can’t afford to be one of those unfortunate surety people.

Questions: Have you ever chosen to cosign? If so, how did it turn out? Can you think of a situation where you’d ever cosign for a stranger? What’s the worst cosign story you’ve ever heard?

Image courtesy of FreeDigitalPhotos.net

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Comments

  1. Proverbs 17:8 should be 17:18

  2. I still consider the capability of a person before I cosign. I used to cosign for anyone I know but after that experience when my colleague just left the company, I couldn’t help it but felt disgrace. There were lots of “should haves”. Now, I am very cautious in this because that signature can put myself in risk.

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