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tips for co-signers


Despite the risks, there may be times when you want to cosign. Your child may need a first loan, or a close friend may need help. Before you cosign, consider this information:

  • Be sure you can afford to pay the loan. If you're asked to pay and can't, you could be sued or your credit rating could be damaged.
  • Even if you're not asked to repay the debt, your liability for the loan may keep you from getting other credit because creditors will consider the cosigned loan as one of your obligations.
  • Before you pledge property to secure the loan, such as your car or furniture, make sure you understand the consequences. If the borrower defaults, you could lose these items.
  • Ask the lender to calculate the amount of money you might owe. The lender isn't required to do this, but may if asked. You also may be able to negotiate the specific terms of your obligation. For example, you may want to limit your liability to the principal on the loan, and not include late charges, court costs, or attorneys' fees. In this case, ask the lender to include a statement in the contract similar to: "The cosigner will be responsible only for the principal balance on this loan at the time of default."
  • Ask the lender to agree, in writing, to notify you if the borrower misses a payment. That will give you time to deal with the problem or make back payments without having to repay the entire amount immediately.
  • Make sure you get copies of all important papers, such as the loan contract, the Truth-in-Lending Disclosure Statement, and warranties — if you're cosigning for a purchase. You may need these documents if there's a dispute between the borrower and the seller. The lender is not required to give you these papers; you may have to get copies from the borrower.
  • Check your state law for additional cosigner rights. 

American Consumer Credit Counseling (ACCC) provides nonprofit credit counseling, financial education, debt relief consolidation and debt reduction services for consumers nationwide. We offer free credit counseling to help individuals and families learn how to pay down credit card debt and how to eliminate debt altogether. As an alternative to expensive unsecured debt consolidation programs for settling credit card debt, our debt management programs help consumers pay off debts and manage credit card debt more quickly by consolidating payments. We also offer debt negotiation services to help reduce finance charges and interest rates. And our financial education services show consumer how to manage money more effectively and how to get rid of credit card debt more quickly – usually in five years or less.

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