Should You Cosign a Loan? 

Do one thing: Educate yourself on all of the legalities and other factors involved before you jump into an agreement to cosign a loan. Read on for more key details.

The Pros and Cons of Cosigning a Loan

On the surface, having a cosigner can help someone with no credit history or a thin credit file qualify for a loan or credit card. But dig just a bit deeper, and you’ll see that cosigning comes with risks for both parties involved. Here’s a breakdown of what to expect whether you are the primary borrower or the cosigner. 

What is a Loan Cosigner?

A cosigner is not the primary borrower, but by signing with the primary borrower, they agree to repay the primary borrower’s loan if payments are missed or the loan goes into default. So, they are on the hook. Sometimes, a cosigner can be a parent, spouse, or other family member who agrees to add their financial information, including income and credit reports, to a loan application to help someone qualify or secure better terms.

Cosigning and Debt

Cosigning for a loan makes you fully legally responsible for the underlying debt, according to the Consumer Financial Protection Bureau (CFPB). That can directly affect your own credit score, borrowing capacity, and very often personal relationships. That’s because debt isn’t always just a number on a computer screen or spreadsheet, and owing large amounts of high-interest debt can weigh heavily on your mood, health, and interactions with others. 

Mental Health Impact of Cosigning

A mental health and money survey from 2025 found that some 43% of U.S. adults admit that money negatively impacts their mental health “at least sometimes” and causes stress, anxiety, depression, and loss of sleep. Financial experts say when considering the risks associated with cosigning, it’s important to understand the full picture and protect your own financial stability first. 

The Financial and Legal Impacts of Cosigning a Loan

Full Legal Liability

When you serve as a cosigner, you are not just acting as a reference for someone who needs help getting a loan. In the simplest terms, being a cosigner means you are a borrower essentially riding side-by-side with the primary borrower. If the primary borrower misses a payment, or stops paying altogether, you will be legally obligated to pay the full debt, plus any late fees. 

Credit Score Risk

As a cosigner for a loan or credit card, the full loan history will also appear on your credit reports. That means – you guessed it – any late or missed payments by the primary borrower will not only damage their credit score, but yours, too.  

Reduced Borrowing Capacity for Cosigning a Loan

Because lenders will count the cosigned loan as your personal debt obligation, that means your personal debt-to-income (DTI) ratio increases, which could potentially prevent you from qualifying for your own mortgage, auto loan, personal loan, student loan, or other lines of credit.

Learn how lenders use your debt-to-income ratio in lending decisions. 

Collection and Tax Risks When You Cosign a Loan

Depending on the state, if the primary borrower defaults on the loan, debt collectors can target your assets, garnish your wages, or sue you before going after the other party, according to the Federal Trade Commission (FTC).

Do Cosigners Get Co-ownership?

No. Cosigning for a loan doesn’t give someone any ownership or other rights to the property the loan is paying for, according to the FTC. Basically, a cosigner’s only role is to repay the loan if the main borrower gets behind on payments or stops paying. It is something you might do for someone you are trying to help.

Other Options to Consider

While you may feel a strong sense of obligation to cosign a loan for a child or family member who is still building their credit profile, you shouldn’t let emotions override your own financial reality. Remember, helping family members or friends should not come at the expense of your own financial security. If you really want to help, consider alternatives. Depending on the situation, you could:

• Offer the person a smaller amount of money as a gift 
• Extend an offer to help them with creating a monthly budget
• Assist them with finding other financing options instead of cosigning

Protect Yourself If You Cosign a Loan

If you are set on helping someone gain a better financial footing by being a cosigner for a loan, consider making these moves before adding your signature.

• Check in on your own budget and make sure you would be able to cover the additional monthly loan payment if you had to.
• Request that the lender or primary borrower send you monthly loan statements or give you access to any online accounts. This can help you stay updated on any missed payments or other changes.
• Make sure you receive an advisory notice from the lender before signing the loan agreement, which typically spells out the terms of the loan and a cosigner’s legal responsibilities. 
• Start checking all three of your main credit reports monthly so you can be alerted to any changes in the loan. You can access those for free at annualcreditreport.com  
• Ask the lender to include an option in the agreement to release you as the cosigner after a certain amount of the loan has been paid back.
  

With reporting by Casandra Andrews

This article is for educational purposes only. It is not to be used as legal, tax, or financial advice. Consult a tax, legal, or financial professional to discuss your individual situation.