Your signature obligates you as if you were the primary borrower. You can never be sure that the other person will pay. The lender is not required to try and collect from the primary borrower before coming after you.

If you wind up paying the debt, you could go after the primary borrower for repayment, but good luck. If he or she didn't have the money to pay the lender, he or she probably won't have it to pay you. And if the primary borrower files for bankruptcy, you will be solely liable for the debt.

Another point many people over look is that co-signed loans can hurt your credit score. Why? Because the amount of debt you are obligated to pay will increase, which affects your debt to income ratio.

Someone Who Has Questionable Spending Habits

If you incur a joint debt, you are liable for all of it if the other person defaults. If you combine your incomes into one bank account, the other person can empty the account, leaving nothing there when the bills come due. This rule even applies for a spouse. Although most spouses don't keep their financial lives separate, it is worthwhile to do so if you can avoid financial disaster.

Don't Make Only Very High-Risk Investments

Invest conservatively, opting for certificates of deposit, money market funds and government bonds over riskier investments such as speculative real estate, penny stocks and junk bonds.