What is a co-signer?

A co-signer agrees to share responsibility for a loan, stepping in to repay it if the primary borrower can’t. Additionally, their credit and income can help the borrower qualify and may lead to better terms, such as lower interest rates. However, if the borrower misses payments, the co-signer must cover the debt—and their credit can be damaged as a result.

Learn more about how co-signing works, whether you’re the primary borrower or the co-signer.

What you’ll learn:

• A co-signer supports a borrower who might need help qualifying for a loan. Co-signers are most often added to mortgages, personal loans, auto loans and student loans.

• Co-signers agree to take the same responsibility as borrowers in a loan agreement and are legally obligated to take over any payments borrowers miss.

• A co-signer arrangement can affect the borrower’s and the co-signer’s credit, depending on how repayment is handled.

• Most major credit card issuers don’t allow co-signers. That includes Capital One. But there may be other options, like becoming an authorized user.

When someone co-signs a loan, they take on the same responsibility for the account as the primary borrower. They also accept legal responsibility to pay for the loan if the borrower misses payments or defaults on the loan. This is all to help assure the lender that the loan will be repaid. 

Here’s what that means for co-signers:

• They have no ownership rights to the funds or properties tied to the loan.

• The loan may appear on their credit reports.

• If the primary borrower doesn’t pay, they could be responsible for late fees and collection costs.

Both co-signers and co-borrowers share responsibility for repaying a loan. The key difference lies in their rights to the funds or property tied to that loan.

Here’s how the two roles differ:

• Co-signers: Responsible for making payments if the borrower can’t pay, but don’t have legal access to the property or money from the loan.

• Co-borrowers: Share payment responsibilities and have equal rights to any property or money tied to the loan.

You’d most likely need a co-signer if you have a low credit score or a high debt-to-income (DTI) ratio, as it might be harder to qualify for loans. But that’s just one example. In general, having a co-signer with a positive credit history could make it easier. And a co-signer can sometimes help secure better loan terms for the borrower and lower interest rates, too.

A co-signer might be an option for mortgage loans, auto loans, personal loans, student loans and some credit cards.

Most major credit card issuers, including Capital One, don’t allow co-signers on credit cards. But if you need help accessing credit, you could consider becoming an authorized user on the account of a trusted friend or family member.

Authorized users could get their own card and use it to make purchases. But the primary cardholder is responsible for the account, including making on-time payments. If both people use the account responsibly, one benefit for the authorized user is the chance to build a positive credit history.

Being a co-signer comes with financial obligations, but that doesn’t mean it can’t be a positive if the loan is used responsibly.

Here are some potential positives to being a co-signer:

• It could improve your credit. If the loan appears on your credit report and there’s a record of things like on-time payments, being a co-signer could have a positive impact on your credit score.

• You could help someone access credit. By being a co-signer, you might help someone, like a family member or friend, access credit or loans they probably couldn’t on their own.

There are also some potential risks to consider for co-signers:

• You’re responsible for unpaid debt. If the borrower misses a payment, you’ll become responsible for it. And if the borrower stops paying altogether, you may be on the hook for repaying the full loan amount. 

• It could hurt your credit. Any negative information reported to credit bureaus could show up on your credit reports. Examples might include late payments or debts sent to collections. 

• It could impact your future borrowing. Becoming a co-signer could change your DTI ratio and credit utilization. These are two factors that might affect other loan approvals or terms in the future.

• It could affect your relationship with the borrower. Shared financial responsibility can cause stress. And when you co-sign a loan, you’ll be financially tied to the borrower for the life of the loan, even if your relationship changes during that time.

If you’d like to learn more about co-signing, these frequently asked questions might help.

A co-signer can help a borrower qualify for certain types of loans, possibly with more favorable terms. But remember that the co-signer has the same financial responsibility to repay the loan as the borrower. 

If you’d like to apply for a credit card but think you may need a co-signer, your first step could be to check whether you’re pre-approved. It’s quick, and it won’t hurt your credit scores.

If you’re new to credit or searching for your next credit card, Capital One can help: 

• If you’re looking to build your credit with responsible use, explore cards for people with fair credit. 

• Earn cash back on every purchase, every day, with a cash back rewards card. 

• Monitor your credit report and score with CreditWise. It’s free for everyone, and using it won’t hurt your credit scores.