Cosigning a Loan: What You Owe, How to Get Off It, and Safer Ways to Help
Figures checked October 27, 2026 against primary sources
When a family member or friend asks you to cosign a loan, they are asking you to promise a lender that you will pay their debt if they do not. That promise is legally the same as borrowing the money yourself, except you usually get none of what the loan buys. This guide covers what a cosigner owes under federal rules, how cosigning shows up on your credit, what happens if the borrower dies or files bankruptcy, how to get your name off a loan, and other ways to help that put less of your own finances on the line.
The Short Answer
- You owe the whole debt. If the borrower stops paying, the lender can collect the full balance from you, plus late fees and collection costs, without first going after the borrower (unless your state requires it).
- It goes on your credit report. The loan counts as your debt, and the borrower's late payments can lower your scores.
- Getting off is hard. You usually need the borrower to refinance in their own name, the loan to be paid off (for example by selling the car), or a cosigner release, which the lender does not have to grant.
- Only sign for an amount you could pay in full yourself. If you could not, a smaller direct loan, a gift, or help with a secured credit card may be a better way to help.
What a Cosigner Owes: The Federal Notice
The Federal Trade Commission's Credit Practices Rule (16 CFR 444.3) requires lenders and retail installment sellers under the FTC's jurisdiction to give a cosigner a separate document before the cosigner becomes obligated. The document must contain this statement and nothing else:
Notice to Cosigner
You are being asked to guarantee this debt. Think carefully before you do. If the borrower doesn't pay the debt, you will have to. Be sure you can afford to pay if you have to, and that you want to accept this responsibility.
You may have to pay up to the full amount of the debt if the borrower does not pay. You may also have to pay late fees or collection costs, which increase this amount.
The creditor can collect this debt from you without first trying to collect from the borrower. The creditor can use the same collection methods against you that can be used against the borrower, such as suing you, garnishing your wages, etc. If this debt is ever in default, that fact may become a part of your credit record.
This notice is not the contract that makes you liable for the debt.
Read that last line twice. The notice is a warning; the loan contract you sign is what makes you liable, so read that too. The same rule makes it a deceptive practice for a covered lender to misrepresent how much a cosigner is liable for.
Three more points from the FTC's consumer guidance:
- Some states add protection. In some states the creditor has to try to collect from the main borrower before turning to the cosigner. The federal notice describes the general rule, not your state's.
- You may not get the notice on a mortgage. The FTC says you might not receive one when you cosign some types of mortgage loans. The liability is real either way.
- You get no rights to the thing being bought. Cosigning gives you no title or ownership of the car or other property the loan pays for.
On a student loan, the CFPB adds that collection can include wage garnishment and offset of tax refunds and Social Security payments. On a car loan, a default can lead to repossession, and depending on state law the lender can sue both you and the borrower for what is still owed after the car is sold.
How often does this happen? On private student loans, the CFPB cites a 2019 survey that found a quarter of co-signers ended up making at least one payment because the borrower did not.
Cosigner vs Co-Borrower vs Authorized User
These three roles are often confused, and the difference matters most when something goes wrong.
| Role | Owes the debt? | Gets what the loan buys? | On your credit report? |
|---|---|---|---|
| Cosigner | Yes, all of it if the borrower does not pay | Usually not | Yes |
| Co-borrower or joint account holder | Yes, equally | Yes, shared access | Yes |
| Authorized user (credit card) | Generally no | Can use the card | Issuers usually report it |
Cosigner. The CFPB describes a co-signer as someone, such as a parent, family member or friend, who adds their income and credit record to another person's application so that person can qualify or get better terms. The CFPB says the cosigner has the same responsibility for the payments as the primary borrower but may not get the privileges of the loan: on a car or student loan, usually only the borrower gets the car or the money. Under the FTC rule, you count as a cosigner if you take on someone else's debt without getting money, goods or services in return, whatever the paperwork calls you.
Co-borrower (joint account). Both people own the account, both have equal access, and both are equally responsible for payments no matter who made the charge. The CFPB says a joint account or a cosigned loan appears on the credit reports of both people, and if a payment is late or missed, both are marked delinquent.
Authorized user. Being an authorized user on someone's credit card generally does not make you responsible for the debt, according to the CFPB, although card issuers usually report authorized users to the credit bureaus. That is why adding someone as an authorized user is a lower-risk way to help them build credit than cosigning for them: the card holder stays responsible, and can remove the user.
What Cosigning Does to Your Credit and Your Own Borrowing
A cosigned loan affects your credit in two ways, even when every payment is on time.
- The payment history becomes yours. The CFPB warns that missed payments by the borrower can appear on your credit reports and lower your scores, making it harder for you to get credit later.
- The balance counts as your debt. The FTC says the lender can report the loan to the credit bureaus as your debt. The CFPB notes a cosigned loan counts toward your total debt level and can make it harder to get an affordable rate when you refinance a home or buy a car.
That second point is the one people miss. Here is a hypothetical illustration: you earn $6,000 a month before tax and already pay $1,500 a month toward a mortgage and a car, a debt-to-income ratio of 25%. If you cosign a $450-a-month car loan for your son and a lender counts it as your payment, your ratio becomes $1,950 out of $6,000, or 32.5%. That could change what you qualify for on your next loan. Try your own figures in the debt-to-income calculator, and see what is a good credit score for how much a late payment can cost.
If the Borrower Dies or Files Bankruptcy
If the borrower dies
The CFPB's guidance is plain: if you borrowed the money as a co-signer, you are responsible for the debt after the borrower dies. An authorized user on a dead person's credit card is not.
Private student loans have a specific federal protection. For private education loans made on or after November 20, 2018, the lender must release the cosigner within a reasonable time after it is told the student borrower has died, and it cannot declare the student in default just because a cosigner died or filed bankruptcy (15 U.S.C. 1650(g)). The law took effect 180 days after it was signed on May 24, 2018, so older loans depend on the contract. The CFPB reported in 2015 that most private student loan contracts it reviewed still had these "auto-default" clauses.
Parent PLUS loans are different because the parent is the borrower, not a cosigner (see below).
If the borrower files bankruptcy
The borrower's bankruptcy does not erase your obligation. The Bankruptcy Code says a discharge of the debtor's debt "does not affect the liability of any other entity" on that debt (11 U.S.C. 524(e)). What changes is timing, and it depends on the chapter:
- Chapter 7: there is no co-debtor stay protecting you. The lender can come to you for payment, and the borrower's discharge leaves your liability in place.
- Chapter 13: 11 U.S.C. 1301 stops a creditor from collecting a consumer debt from someone who is liable on it with the debtor, such as a cosigner, while the case is open. The stay ends if the case is closed, dismissed or converted to Chapter 7 or 11, and a court must lift it if, for example, the cosigner was the one who actually got the benefit of the loan, or the debtor's plan proposes not to pay that debt. It also does not protect someone who cosigned in the ordinary course of their business.
Our Chapter 7 vs Chapter 13 guide explains both chapters in more detail. If a lender or collector contacts you about a cosigned debt, our guide to debt collectors covers your rights.
How to Get Off a Cosigned Loan
The FTC says the lender and the main borrower must both agree before you can be removed from a loan. Lenders have little reason to agree, because removing you takes away a second person they can collect from. In practice there are four routes:
- The borrower refinances in their own name. This is the usual answer to how to remove a cosigner from a car loan. The borrower takes out a new loan on their own credit and income, the new loan pays off the old one, and your obligation ends when the old loan is paid. It only works once the borrower can qualify alone. Compare offers on our auto loan rates page.
- Sell the car (or other collateral) and pay off the loan. If the sale brings in less than the payoff amount, someone has to cover the difference before the loan is paid off and your obligation ends.
- Cosigner release. Some private student loans let the cosigner off after the borrower makes a set number of on-time payments and meets credit requirements. The CFPB says the criteria should be in the loan's terms and on the lender's or servicer's website. Do not count on it: in a 2015 review of industry practices, the CFPB found that 90% of borrowers who applied for co-signer release were rejected, and that some companies disqualified borrowers who had used forbearance.
- Pay the loan off early. You or the borrower pay the balance, and the obligation ends.
Simply asking the borrower to "take you off" does nothing on its own. Until the lender confirms in writing that you are released or the loan is paid off, you still owe it.
Questions to Ask Before You Sign
- Could I pay the whole balance, plus fees, if I had to? If the answer is no, you are betting your own finances on the borrower.
- Why did the lender want a cosigner? A thin credit file (a young adult with no history) is a different risk from a record of missed payments or an income that cannot cover the payment.
- Is the borrower's budget realistic? Go through their income and expenses with them, as both the FTC and the CFPB suggest.
- What exactly am I signing? Ask for the full contract, the total amount you could owe, and whether you are pledging any of your own property.
- Does the loan offer a cosigner release, and what are the rules? Get them in writing.
- What happens to our relationship if this goes wrong? Lending to family can strain the relationship as much as the bank account.
- Do I need my credit in the next few years? A mortgage, refinance or car loan of your own may cost more while this loan is on your report.
The CFPB adds that a lender cannot force you to add your information to someone else's loan. If you feel pressured to sign, by the lender or by family, you can say no.
If You Do Cosign: How to Protect Yourself
- Get your own access to the account. The CFPB suggests asking the lender to send you monthly statements or give you access to the online account, so you see a missed payment when it happens, not months later.
- Set up payment alerts through that online access if the lender offers them.
- Write down your deal with the borrower. A short signed agreement between the two of you that covers who pays, what happens if they cannot, and when they will refinance or apply for release. It does not bind the lender, but it makes expectations clear and may help if you ever need to recover money from the borrower.
- Keep copies of the contract, the Notice to Cosigner and every statement.
- Check your credit reports regularly and dispute anything wrong.
- Act early if trouble starts. The CFPB advises asking the lender about lower payment plans or temporary pauses before the loan goes into default, and getting any agreement in writing.
- Check your state's rules through your state banking regulator or attorney general, as the FTC suggests.
Alternatives: Lending Money to Family or Friends, Gifts, Secured Cards
If the goal is to help someone you care about, cosigning is often the riskiest way to do it, because your exposure is the full loan and you do not control the payments. Some alternatives cap what you can lose.
Lend the money directly, with a written note
Lending money to family or friends yourself means you choose the amount, and the most you can lose is what you hand over. A simple written promissory note, signed by both of you, should state the amount, the interest rate (if any), the payment schedule, and what happens if a payment is missed. A common rule of thumb is to lend only what you could afford never to see again. Large or interest-free loans to family can have tax consequences, so for bigger sums check with a tax professional.
Give a gift instead
If you would not ask for the money back anyway, calling it a gift avoids the awkwardness of a loan that goes unpaid. Large gifts can bring federal gift tax reporting rules into play; our gift tax guide explains the rules.
Help with a secured credit card
For someone who needs a cosigner only because they have no credit history, a secured credit card may solve the real problem. The CFPB describes it as a card that usually needs a cash security deposit, with a higher limit for a larger deposit, and says these cards are often used to build credit history. You could help with the deposit, or add them as an authorized user on your own card. See our list of credit cards for building credit.
For college: parent PLUS loans instead of cosigning
Parents of a dependent undergraduate can borrow a federal Direct PLUS loan in their own name instead of cosigning a private student loan. The parent is the borrower, and studentaid.gov says the loan cannot be transferred to the child. For loans first disbursed from July 1, 2026 through June 30, 2027, the fixed rate is 9.07%, with a 4.228% loan fee. Under the One Big Beautiful Bill Act, new parent PLUS borrowing is capped at $20,000 per student per year and $65,000 per child in total for academic years starting on or after July 1, 2026, with a limited exception for students already enrolled in the same program. A parent with an adverse credit history can still qualify by getting an endorser, someone who agrees to repay the PLUS loan if the parent does not, which is the federal version of a cosigner.
A debt-averse plan, saving ahead and choosing a school the family can afford, avoids both questions. But if borrowing is the choice, compare a PLUS loan's federal repayment options with what a private lender offers before anyone cosigns.
FAQ
What are a cosigner's responsibilities?
To repay the loan if the borrower does not, up to the full balance plus late fees and collection costs. The lender can collect from you without first trying the borrower (unless state law says otherwise) and can sue you or garnish your wages.
Does cosigning a loan affect my credit if the borrower pays on time?
The loan still appears on your credit report as your debt, which can affect how much more you can borrow. On-time payments are not a mark against you; late ones are.
How do I remove a cosigner from a car loan?
The borrower refinances the loan in their own name, or the car is sold and the loan paid off. Any release needs the agreement of both the lender and the borrower.
Can a cosigner take the car?
No. Cosigning gives you no title or ownership of the property the loan pays for, unless you are also named on the title.
What happens to a cosigned loan if the borrower dies?
In general the cosigner still owes it. Private student loans made on or after November 20, 2018 are an exception: the lender must release the cosigner after being told the student borrower died.
If the borrower files Chapter 7, am I off the hook?
No. The borrower's discharge does not affect your liability, and Chapter 7 has no co-debtor stay. In Chapter 13, collection from you is paused while the case is open, with exceptions.
Is it better to cosign or lend money to a family member?
Lending directly limits your risk to the amount you lend and keeps your credit report out of it. Cosigning can cost you the whole loan plus fees and affects your credit for the life of the loan.
This article is for general information and is not legal or financial advice. The Notice to Cosigner is quoted from 16 CFR 444.3 on ecfr.gov; cosigner, joint account and authorized user guidance is from consumerfinance.gov and consumer.ftc.gov; bankruptcy and private education loan rules are from 11 U.S.C. 524 and 1301 and 15 U.S.C. 1650 on govinfo.gov; parent PLUS figures are from studentaid.gov. All read on 2026-10-27. The debt-to-income example is hypothetical. State law may give cosigners more protection; for a specific loan or a bankruptcy, talk to a lawyer.
