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What does it mean to be a co-signer on a loan?

If you have good credit and you have a family member, friend or loved one with less-than-ideal or no credit, becoming their co-signer on a loan could help them qualify for a loan they might not otherwise be able to get or qualify for a loan with more competitive terms. 

It’s important to consider what can happen when you become a co-signer on somebody else’s loan.  

Here are some implications of being a co-signer on a loan:

  1. If your friend doesn't pay, you’re responsible for making sure the loan is paid unless your friend assumes the loan without you as a co-signer, closes the loan, or qualifies for a refinance without you as a co-signer.
  2. The loan appears on your credit reports, along with any late payments, defaults and missed payments sent to collections.
  3. Taking on any kind of additional debt typically increases your debt-to-income ratio. 

Read more information about: Co-signing a loan: Pros and cons

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