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The Things We Do for Love: What It Means to be a Co-Signer

We all want to be supportive of loved ones when they need our help. But if someone asks you to co-sign on a loan or lease for them, don’t take it lightly. When you co-sign, you’re committing to the same thing as the borrower or tenant — a legal obligation to pay that loan, plus any late fees or collection costs. 

Why would someone need a co-signer? Lenders base loan approval and rates on many factors, such as credit score and past financial history. If a potential borrower has a low credit score or poor financial history, they may have a hard time being approved for a loan, or be approved for less favorable terms, such as a higher interest rate and fees. This is where a co-signer may come in—a person may be asked to “guarantee” the loan debt for someone else.

How much are you liable for if you co-sign a loan? 100%.

That’s right, you are 100% liable for the loan, including any charges and fees. Plus, if a borrower defaults on a loan or breaks a lease, the lender or landlord may sue you directly for the balance. In fact, the lender could decide to go after you and not the borrower.

The bottom line is, if YOU can’t pay back the loan, it’s probably not a good idea to co-sign for it either. Your credit may suffer, your relationships may suffer, and it could wind up costing you a lot of money in the end.

Only you can make the decision if co-signing a loan for someone else is the right decision. Weigh the risks and benefits before committing yourself. Remember, you are committing yourself to the entire loan —and possibly risking your own credit—when you co-sign.