Taking Out A Loan

Dear Sara,

My wife and I are just a normal hardworking American family. We earn just about enough to meet our needs and put away a little for retirement. Our daughter has started a business that she seems to think is doing well. She hasn’t established any credit yet and wants us to cosign a loan so she can expand her business. She is arguing that she is doing great with her business and this will be very little risk for us. I know that if she can’t make enough money to pay her payments I will be responsible and I don’t think I can afford it. She thinks that if I really care about her I would do this. Is this a good idea or not?

Dear Frank,

It sounds like that you have already determined that this is not a good idea. Your daughter seems to be using emotional blackmail to get you to do this (if you really care about me.) You have worked hard to stabilize your family and if you do this for her you will put yourself in a precarious position. Maybe your daughter should wait a while to enlarge her business and establish her own credit first. She may be mad at you for a while but she will get over it.

Good luck.


  1. My cousin co signed a loan so she could get a loan for nursing school. Six months after graduating she got mad at her parents and refused to pay the loan. My cousin had to work to pay off the loan. The spoiled brat makes more per hour than her parents have ever made.
    Emotional black mail is a warning that she most likely will default.

  2. Arlene Barton says:

    Dave Ramsey would say “NO.” If her business is doing so well, she save up & expand slowly.

  3. Ken Mosley says:

    Has she tried to obtain a loan on her own? If not, she should. If she has and could not obtain one, she’s not doing as “well” as she thinks! If she’s not doing as “well” as she thinks, you would be assuming her liability which would be practically guaranteed!

  4. Most startup businesses fail, does she understand that? She can claim that her business is doing well, but do the accounting books confirm what she is telling you? Does she have a business plan so you can see specifically what she intends to use the money for? Could she be loaned smaller amounts in increments? How much of the expansion money can she put in? Are there any other close friends or relatives who will lend her money to spread the risk and reduce your risk? Has she got sufficient collateral for a loan even with a cosigner? Sara’s comment is spot on…don’t fall for emotional blackmail. Sound business decisions are based on knowledge, facts and logic, not emotions.
    Furthermore, if you should decide to co-sign for the loan and her business is successful, then you should be rewarded when she can afford it.

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