3 Things you Need to Know Before you Co-sign a Debt

When a family member or close friend entreats you for assistance in getting credit through your co-signing a loan, there are some key things to keep in mind.

It could be a matter of getting a joint arrangement with your partner or simply co-signing a loan for a friend.

Regardless, there are three key facts to understand before you take the leap.

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  1. When you co-sign for debt, you become responsible for the full amount. This means that you must make the full payment in the event of the other party defaulting. If one borrowing party fails to pay, the creditor has full rights to pursue you for the entire amount owing. This is referred to as joint and several liability. Consider whether you are in a position to pay off the debt in full in the situation the other party defaults. Understand that the creditor can demand the full amount – not just an installment. Since it would impact your credit, you must consider the full risks associated with signing on for this debt.
  2. Certain credit cards indicate that secondary debtors may be held entirely responsible for balances owing. This is true even if the original application was not co-signed. Be prudent and learn whether you are on the hook for the full amount owing. Read all the fine print to completely understand what your rights and responsibilities are as a co-signer. If you are confused by any of the jargon, ensure that you inquire about it prior to signing any agreement.
  3. All borrowing parties have the legal right to receive any and all information from the lending party which relates to the loan. Up until you, either verbally or in writing, waive this right, you are entitled to all relevant information. This means that the creditor is obligated to give you a copy of any agreements and all statements pursuant to the loan or credit arrangement. By going through the monthly paperwork, you can get a thorough understanding of the account’s history. To cover all your bases, once the debt is repaid, ensure that you receive a written statement confirming that you are no longer liable for the amount.


The act of co-signing for the debt is a large undertaking.

It can result in many issues if a co signing party fails to gain all relevant information.

Ensure that you are fully informed on all aspects of the credit arrangements; that you know your rights and responsibilities, before signing any agreements.

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