What is a Co-signer?

By Chandler Sullivan
April 26, 2022 | 2 Min. Read

When it comes to a loan or even signing a lease, you may have heard of the term co-signer. But what is a co-signer? What does it mean and why would you need one?

A co-signer is another person that shares responsibility for making payments in addition to the primary borrower. Co-signers legally promise to help pay back a loan or lease, in the chance the primary borrower cannot make the full payment.

If you qualify for a home/auto loan, or are in good standing to lease on your own, you probably don’t need a co-signer. But if you have a minimal loan/renting experience or lack enough credit history, you may be told that you need a co-signer. When this happens, the primary borrower can ask a family member, spouse, or friend to help them, even if the loan or lease doesn’t personally involve them.

Why Might You Need One?

If you have low or bad credit and are looking for a mortgage loan, you may be approved more easily with a co-signer. With this additional assurance, you might get a better interest rate.

The obvious downfall for a co-signer is that they are taking on financial responsibility on behalf of someone else. On top of the primary borrower’s credit on the line, the co-signer is also at risk too. If both of you are paying on time, chances are both of your credit scores will continue to reflect good scores. But if the primary borrower can’t pay and the co-signer makes a late payment, both of your credit scores can be negatively impacted.

This is why it is important to choose your co-signer carefully. Your friend or family member may say they have the financial means to support you because they care about you, but make sure you are asking them for proof beyond their words.

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