Click to view our Accessibility Statement or contact us with accessibility-related questions

The Benefits and Issues of Co-Signing a Loan

Share This Page


 Co-signing on a loan or credit card is a serious matter that should not be entered into lightly. Essentially, when you co-sign on a loan, you are taking on legal responsibility for the account, and it will appear as your obligation on your credit report. Should the other person miss payments or default on the loan, your credit reports will show the delinquencies and the creditor may require you to pay.


Depending on your financial situation, getting a co-signer on a loan may or may not be a good idea when you apply for a loan. Work with your lender to calculate what rates you could receive alone and what rate you could receive with a co-signer. Does it still make sense to get a co-signer?


If you choose to be a co-signer, make sure that you pick a person who is trustworthy, you will be in contact with for a long time, and who understands his/her responsibility. Family members, spouses and close friends are good options. Co-signing for coworkers or people you barely know can lead to credit problems.


Once the account is opened, it’s very tough to remove a co-signer off the loan. The party keeping the account will need to assume, close or refinance the loan in order to terminate the co-signing agreement. Typically, a divorce decree or other agreement between two parties that establishes responsibility for payment of an account does not relieve an individual of his liability to the creditor. The individual must still repay the loan, although he may recover from the other party. Unless the creditor releases a party from an account, a divorce decree or other agreement between two individuals will not stop the account from being reported on each individual’s credit reports.


If you have co-signed on a loan, check your credit reports from TransUnion, Equifax and Experian regularly to see how the other person is maintaining the account. If you notice a late payment, call the person and talk about his/her financial situation. Addressing a potential problem early can help prevent credit problems later.

Now that you know more about the hazards of co-signing on a loan, get your Credit Report & Score.


Take the next step toward financial health

Advertiser Disclosure: TransUnion Interactive may have a financial relationship with one or more of the institutions whose advertisements are being displayed on this site. In the event you enter into a product or service relationship with any such institution through the links provided on the site, TransUnion Interactive may be compensated by such institution. This compensation may impact how and where products appear on this site including, for example, the order in which they appear. TransUnion Interactive does not include all credit card companies or all available credit card offers.

What You Need to Know:

There are various types of credit scores, and lenders use a variety of different types of credit scores to make lending decisions. The credit score you receive is based on the VantageScore 3.0 model and may not be the credit score model used by your lender.

*Subscription price is $24.95 per month (plus tax where applicable).