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Neighbors FCU


The Informed Cosigner! What it really means... - Sunday, July 1, 2012

The Informed Cosigner!
                                        What it really means…

Many of us have heard of cosigning a loan or credit card, but when you sign your name to that line do you completely understand all the obligations your signature brings?  Here are some of the most important aspects regarding cosigning you should know before you commit yourself to another person’s debt.

What is cosigning?
Cosigning is a practice where a person (cosigner) agrees to take on the contract or debt of another person in the instance that the person is not able to meet the terms of the contract or financial obligation.

What do people need co-signers for?
Young people and people with bad credit may need a cosigner for an apartment, vehicle or house purchase as well as for personal loans or credit cards.

What does that mean for the cosigner?
As the cosigner on a contract, you are responsible for all the debts as well as the fees and interest that accumulates on the contract you signed.  This means that if the person you cosigned for does not make a payment or forfeits their contract, then you would be responsible for the debt and all accompanying fees and interest charges.

Cosigning and your credit:
When cosigning on a contract, that contract will be reported on your credit report as well as for the person you cosigned for.  If they make late payments or claim bankruptcy then those negative reports are reflected on your credit history as well; all these things will lower your credit score.

Debt to income rations:
Cosigned loans and credit cards show up as debt in the cosigner’s debt to income ratio when applying for a new loan, credit card, car or house. 

The buck stops with you!
Cosigners are being asked to take a risk that the landlord or lending institution is not willing to take, so carefully consider the character and financial trustworthiness of the person you are guarantying.  Be sure that you can afford to pay this debt and that you want to accept this responsibility.