Co-Signer

Co-signer summary:

• A co-signer signs a loan or credit agreement along with the primary borrower.

• Co-signers aren't responsible for making payments unless the primary borrower fails to do so.

• A co-signer is slightly different from a co-applicant or co-borrower. 

Co-signer definition and meaning

A co-signer on a loan is someone who guarantees repayment of the debt if the primary borrower doesn't pay. The primary borrower is the person who receives the loan funds. For example, a parent might co-sign a student loan so their child can get money to pay for school. 

Co-signers are legally responsible for the debts they agree to. If the primary borrower stops payments for any reason, the lender can take collection actions against both of you. Co-signed loans and lines of credit can show up on both people’s credit reports. 

A co-signer is different from a co-applicant. A co-applicant is someone who jointly applies for a loan with someone else. If the loan is approved, they both become co-borrowers, which means they both get access to the loan funds and share responsibility for the payments. 

Key concept: Someone who guarantees a loan for another person.

More on co-signer

Loans can help you get where you need to go financially. For example, you might need a personal loan to consolidate debt or an auto loan to buy a car. You can apply for loans on your own or bring a co-signer on board to help boost your odds of approval. 

A co-signer signs their name to the loan agreement with you, and they share legal responsibility for the debt. It may be easier to get a loan with a co-signer if they have good or excellent credit. 

Co-signer: a comprehensive breakdown

When you apply for loans, lenders usually check your credit. They do that to see how well you manage credit and debt. 

If you have a lower credit score a lender might see you as higher risk, which could make it harder to get approved. A co-signer can help offset some of that risk if you want to apply for:

• Car loans

• Student loans

• Personal loans or lines of credit

• Mortgages

A co-signer isn't the main borrower on a loan—they just agree to be responsible for someone else's debt. If the main borrower misses a payment, the lender expects the co-signer to pick up the slack. 

Co-signers don't have any right to the loan proceeds or any property the loan is used to purchase. Their only role is to make sure the loan gets paid if the main borrower doesn't meet their obligations. 

When you might need a co-signer

You may need to ask someone to co-sign a loan for you if your credit scores are lower than you’d like. Lenders typically want to lend to people with good credit, which is a score of 670 or higher on the FICO scale. 

How a co-signer benefits you:

• A co-signer could make it easier to get approved for loans or lines of credit if your scores aren't great.

• You might have access to a broader range of loan options with a co-signer.

• If your co-signer has good or excellent credit, that could help you unlock lower rates. 

Co-signer risks

If you ask someone to co-sign a loan for you, the biggest risk is that the relationship could sour if you don't pay the loan back. Missed payments or default (which means you stop paying altogether) can cause serious damage to your credit scores—and your co-signer's. 

If you have money problems and can't pay your loan, it's best to give your co-signer a heads up. You and your partner might be able to work out an agreement to keep paying the loan while you get back on your feet. 

What if someone asks you to co-sign for them? You'll have to decide how great the risk is to your credit and whether you'd be okay with making payments if the main borrower can't or won't. If you wouldn't be able to fit the loan into your budget in a pinch, then you may want to politely turn down the request.