What is Co-Signer?

A co-signer is someone who agrees to share responsibility for your loan. They use their credit history and income to help you qualify for a loan you might not get on your own. Lenders often require a co-signer when the primary applicant has limited credit history, low credit scores, or insufficient income to qualify alone.

Co-signing helps the primary borrower secure approval or obtain lower interest rates. However, it carries high risk for the co-signer. The co-signer is legally responsible for the entire outstanding loan balance. The loan and its payment history appear on both the primary borrower's and the co-signer's credit reports.

Any missed payments or delinquencies by the primary borrower will directly damage the co-signer's credit score. The debt also increases the co-signer's debt-to-income (DTI) ratio, which can affect their ability to secure loans. Under FTC rules, lenders must provide co-signers with a 'Notice to Co-signer' detailing these legal liabilities before signing.