Mixing family and money can be dangerous, and I've seen it destroy more relationships than it has helped. Right now, things are probably fine between you and your sister, and she will understand if you are unable to help. If you cosign on her loan, you will always wonder how she's doing financially, and suddenly you'll be more concerned about her spending habits or making payments. Talking about money is probably one of the least exciting, and potentially fatal, topics for a conversation.

There's a reason that most people say if you are going to help family out financially, don't do a loan, just make a gift. If you are expecting to be repaid, you will at some point resent that person, and they will probably stop talking to you. If your sister has a hard time making payments in the future, your relationship could be over - or at the very least, it would never be quite the same.

Also, keep in mind that if you are wanting to buy a house, car, or get a loan for any reason in the next 10 years (or up to 25 years) that debt will show up on your credit report and your credit will be affected. If she can't make payments, you will have to take over or else your credit will take a hit and they'll be coming after you.

If, however, you don't care about your credit for any reason, some advance planning can probably make you judgment-proof.

Bottom line, it's easier to say "no, sorry" now than to get involved. Past experience shows once you help someone out one time, they will keep coming back for more help as well.