Think Before You Sign: The Real Cost of Co-signing

Written by: Kiya (she/her)

3 min read | Published: November 3, 2026

Two people reviewing documents together at a table.

A friend, family member or significant other asks you to co-sign a loan. They assure you they will make every payment, so adding your name may seem like a simple way to help. However, before agreeing to help someone financially, it's important to understand what you're actually signing up for.

Co-signing is more than just offering support. When you co-sign someone's loan, you're accepting responsibility for the debt if they can't make the payments. Missed payments or defaults can affect not only the primary borrower, but also you as a co-signer. This can impact your personal credit, payment history and ability to qualify for future loans. Depending on the loan agreement, you may also be responsible for additional costs, such as late fees or collection expenses.

Why would someone need a co-signer in the first place?

Someone may need a co-signer if they do not meet the lender's requirements on their own. We often see this with young adults making their first large purchase, such as buying a car.

Without an established credit history or consistent income, someone may struggle to qualify for a loan. A co-signer gives lenders another person who is legally responsible for the debt if the primary borrower cannot make payments. While co-signing can help someone qualify for a loan, it is important to understand how it can affect your own financial future.

How can co-signing affect your credit?

One of the biggest things to consider before co-signing is how it could affect your credit and ability to borrow. When you co-sign a loan, someone else’s payment habits can become your problem too. If they make late payments, miss payments, or stop paying altogether, you may be responsible for making those payments. Missed or late payments can hurt your credit score if they're reported to the credit bureaus.

When you apply to co-sign, the lender may run a credit check. If this results in a hard inquiry, your credit score could be temporarily affected. Even if the primary borrower makes every payment on time, taking on an additional loan can affect your ability to qualify for credit of your own.

For example, imagine you co-sign a car loan for a friend. A year later, you decide it's time to purchase a vehicle of your own. Even if your friend has made every payment on time, lenders may still consider the loan you co-signed when reviewing your application. Because you're financially responsible for that debt, it could affect your ability to qualify or how much you're able to borrow.

What should you consider before co-signing?

Before agreeing to co-sign, ask yourself a few important questions:

Could I afford to make these payments if the primary borrower was unable to?
Have I reviewed the loan terms and conditions, including my responsibilities as a co-signer?
Is the person I’m co-signing for someone I trust and who has demonstrated financial responsibility?
How could taking on this additional debt affect my own financial goals?

Communication is also important. Before signing, ask how you can be kept informed about the loan and whether you can be notified if a payment is missed. It's also a good idea to keep copies of the loan agreement and other important documents.

The cost of co-signing can go beyond making someone else’s loan payments. It can affect your credit, borrowing ability and future financial goals. Before agreeing to co-sign, make sure you understand the responsibility that comes with adding your name to someone else’s loan and consider whether you’re financially prepared to take on the debt if necessary.