Cosigning a Loan

What Is It

A cosigner is someone who agrees to be legally responsible for a loan they aren't the primary borrower on — usually because the primary borrower doesn't qualify alone, whether from a thin credit history, a lower income, or both. The cosigner's income and credit history are what actually get the loan approved, or get it a better rate than the primary borrower could have gotten alone.

Why It Matters

Cosigning isn't a favor with limited downside. Per the FTC, you may have to pay up to the full amount of the debt if the borrower doesn't, and in most states, the creditor can collect from you without first trying to collect from the borrower at all. The same collection methods that apply to the borrower — a lawsuit, wage garnishment — apply to you too. The loan also becomes part of your own credit record immediately, and lenders will treat it as your own obligation when you apply for credit later, regardless of whether a single payment is ever missed.

Quick Example

A parent cosigns a $20,000 private student loan for their child. If the child misses payments for a few months, the loan can appear as delinquent on the parent's credit report too — and in most states, the lender can pursue the parent directly for the full remaining balance without exhausting collection efforts against the child first.

Try It Yourself

See what the monthly payment and total interest actually look like before agreeing to cosign.

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