There may be a point in your life that someone needs your help with getting a loan. Perhaps that person is a sibling, child, or long-time friend. And if your credit score is great, you are certainly a suitable candidate for co-signing. Before you agree to take on this role, however, you need to understand the potential implications.

What does signing a loan mean?

When you co-sign a loan, you are legally responsible for the repayment even if you are not the person who needed the loan in the first place. As long as your name is on the loan agreement, the lender in question can track you down if the main borrower – the person you are helping – does not keep up with their payments. At this point, you run the risk of having to pay back money that you did not borrow yourself or your salary will be foreclosed if you cannot make those payments.

Additionally, if you co-sign a loan that the main borrower is in arrears on, you risk damaging your own creditworthiness. That, in turn, could make it much harder for you to borrow money when you need it. Hence, you really cannot sign a loan for everyone. Here are three situations in which it pays to turn down someone’s request to be their co-signer.

1. The borrower is bad with money

If the person you are asking to sign a loan is an adult, chances are he or she may not qualify for a loan on their own – the reason being that their creditworthiness is appalling. If you know for sure that the person asking you for a loan is poor with money or has had a history of debt accumulation and struggling with it, then there is no way you want to take the risk of signing and possibly having cover these debts yourself.

2. The borrower has no experience in handling money

Sometimes the reason people need help getting credit isn’t because they’ve proven themselves bad with money, but because they haven’t had any experience at all. For example, your child might ask you to sign a loan for a car and they might be the most responsible borrower you have ever come across. But because he or she has no credit history and no experience in paying back debts, you shouldn’t take this risk. The same goes for an older adult in your life who has never had to deal with money on their own – say, a cousin in his late twenties who is moving out of his parents’ house for the first time and doing independent bills.

3. You plan to apply for a loan yourself

When you co-sign a loan, the monthly payment associated with it counts as money for which you are responsible. And that could prove problematic if you want to borrow money yourself. Whenever you apply for a loan, be it a personal loan, a mortgage, or a car loan, lenders consider your debt-to-income ratio, which is a measure of how much debt you owe in relation to your income. The higher this rate, the lower your chances of getting a loan – which is why you shouldn’t take the risk knowing you will be applying in the near future.

Don’t be afraid to say no

It’s easy to be pressured to co-sign a loan, especially when the person asking you is someone you care about. But remember, there is nothing wrong with looking after your own financial interests and if you find yourself in an awkward position as a co-signer, don’t hesitate to say no.