A cosigner promises to pay a loan if the borrower does not. Lenders can collect from you as soon as the borrower falls behind.
What you are agreeing to
- Full responsibility for the entire debt, including fees and interest.
- Collection actions against you, including lawsuits and credit reporting.
- Possible effects on your ability to get other loans.
- Liability even if the borrower files for bankruptcy.
Before you cosign
- Ask whether you could afford the full payments.
- Request access to account information and payment alerts.
- Make sure you receive copies of loan documents.
- Check whether the lender offers a cosigner release after on-time payments.
- Consider alternatives, such as a smaller loan or helping with a down payment.
If the borrower stops paying
Contact the lender immediately, discuss options and consider paying to protect your credit. Keep records. You may have a claim against the borrower, but collecting is difficult.
Getting out
Options include refinancing in the borrower's name only, a cosigner release if available or paying off the loan. Some federal student loans have special rules, for example on discharge if the borrower dies. Read the contract.
Frequently asked questions
Does cosigning affect my credit?
Yes. The loan appears on your report and affects your debt ratios.
Can a lender go after the cosigner first?
Often yes, depending on the contract and state law.