The long-term risk of co-signing a loan for your loved one is that you may be rejected for credit when you want it. A potential creditor will factor in the co-signed loan to calculate your total debt levels and may decide it's too risky to extend you more credit.

Why you should never co-sign?

When you co-sign a loan or credit card account, you are liable for any debt incurred. ... According to the Federal Trade Commission, 75 percent of all co-signed loans in default are ultimately repaid by the co-signer — not the original borrower.

Is it a bad idea to co-sign for someone?

If you co-sign a loan for a friend or family member, you could help that person buy a house or car, obtain much-needed cash or secure enough money to attend college. But if the co-sign arrangement doesn't work out, you could severely damage your credit as well as your relationship with the borrower.