Banking · Module 1 of 5
Lending to people you know
Lending to friends and family, cosigning a loan, and what it can really cost you.
Key terms in Lending to people you know
- Co-signer
A co-signer is a person, often a relative or friend, who adds their own income and credit record to someone else's loan application. By signing, the co-signer becomes legally obligated to repay if the main borrower cannot. Lenders can pursue a co-signer with the same collection methods available against the borrower.
Source: Consumer Financial Protection Bureau, Should I agree to co-sign someone else's car loan?
- Collateral
Collateral is an asset that secures a loan, which the lender may take if the borrower does not repay. A house backing a mortgage and a car backing an auto loan are common cases. A loan backed this way is called secured, and one with no such backing is called unsecured.
Source: Consumer Financial Protection Bureau, Financial Terms Glossary
- Gift tax
Gift tax is a U.S. federal tax on transfers of money or property to another person for which full value is not received in return. The giver, called the donor, is generally the one responsible for any tax owed. Whether a transfer counts as a gift depends on whether repayment or equal consideration is expected.
Source: Internal Revenue Service, Frequently asked questions on gift taxes
Every term on Lever is in the money glossary.
About this module
Lending to people you know is part of Banking, one of 15 subjects in Lever. It’s a short run of 6 lessons, about 15 minutes in all, so you can finish it in one sitting.
Every lesson takes one idea at a time. You read it with the math worked out step by step, answer a question that puts it to use, then see why the right answer is right and why the others aren’t.
It’s for anyone who was never taught this, and you don’t need to know anything first. Every lesson is free. Lever works out what you already know, so you can start here or let your path bring you to it.
More in Banking
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2
What a bank actually does
What a bank does with your money, how it makes a living, and how to choose between a bank, a credit union and an online bank.
5 lessons -
3
Where the money sits
Checking, savings, fixed-term deposits and more: what each account pays, how easy it is to reach, and when switching is worth it.
8 lessons -
4
What borrowing costs
What a loan is made of, what the yearly rate means, and why paying only the minimum costs so much.
5 lessons -
5
Moving money in and out
Getting paid, using ATMs, overdrafts, and the real difference between debit and credit cards.
7 lessons
Try this module
It’s part of Banking. Lever will bring it to you when you’re ready, or you can go straight there.