What Is a Cosigner?
A cosigner is a person who signs a loan or lease alongside the main borrower and agrees to be equally responsible for repaying it. If the borrower does not pay, the cosigner must. Students often need cosigners for private student loans, apartment leases and sometimes credit cards, because they have limited credit history and income.
Why lenders ask for one
Lenders want assurance that they will be repaid. A cosigner with a good credit record and stable income reduces the risk, which can mean approval for a loan the student could not get alone, and often a lower interest rate. Landlords ask for guarantors, a similar role, for the same reason.
Cosigner versus guarantor
In many places the terms are used interchangeably. In the UK, a guarantor for a rental typically agrees to pay if the tenant does not, and a cosigner for a US loan is jointly responsible from the start. Read the contract to see exactly what the person agrees to.
Risks for the cosigner
- Full liability: they are legally responsible for the entire balance if you stop paying.
- Credit effects: the loan appears on their credit report, and late or missed payments harm their score.
- Borrowing limits: the debt may reduce their ability to borrow for their own needs.
- Relationship strain: money problems can affect families and friendships.
Risks for the borrower
If you miss payments, you damage your cosigner's finances as well as your own. It is important to make a plan, communicate and keep payments on time.
Cosigner release
Some private lenders let the borrower apply to release a cosigner after a set number of on-time payments, often 12 to 48, and meeting credit and income criteria. Not all lenders do, and approval is not guaranteed. Ask about conditions before taking the loan.
Alternatives
- Federal student loans in the US do not usually require a cosigner for most undergraduates.
- Scholarships, grants and work-study reduce borrowing.
- Shop around: compare rates and terms from several lenders, including credit unions.
- Build credit with a secured card or on-time payments.
- Use a rent guarantee service instead of a personal guarantor, if available.
Related terms
See loan servicer, APR, interest capitalization, credit utilization and loan forgiveness.
Frequently asked questions
Why do students need a cosigner?
Many students have little credit history or income, so lenders and landlords ask for a creditworthy adult to share responsibility. A cosigner can also help you get a lower interest rate.
What are the risks for a cosigner?
They are legally responsible for the debt if you do not pay, and missed payments affect their credit. It can also limit their ability to borrow.
Can a cosigner be released?
Some lenders offer cosigner release after a number of on-time payments and a credit check on the borrower. Ask about this before signing.