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Is it bad to co-sign for someone? How to decide

Co-signing is borrowing the money yourself and hoping someone else pays it. It isn't always wrong, but say yes only if you could pay the whole loan without them, and you'd still be OK with them afterwards.

Checked 2026-09-28 · All guides

If you're not sure what co-signing legally means, start with what a co-signer does. This page is about the decision: yes, no, or "not this, but I can help another way".

First, run the numbers

Enter the loan you've been asked to co-sign, and the month you think payments might stop. For the example below, enter $12,000, 9%, 60 months and 6 payments made.

Loan amount ($)Interest rate (APR, %)Loan length (months)Months the borrower pays before stopping

Monthly payment	$311
If payments stop after 18 months, you could owe	$11,183 plus late fees and collection costs
Payments still to go at that point	42
Total interest if every payment is made	$3,683

Even if every payment is made on time, lenders count the $311 a month as your debt when you apply for credit.

Assumes a fixed rate and equal monthly payments. Late fees and collection costs would come on top.

A worked example: a $12,000 car loan

Your brother asks you to co-sign a $12,000 car loan at 9% for 60 months. The payment is $249.10 a month. He pays for 6 months, then loses his job and stops.

If the lender tells you after the first missed payment, you could pay $249.10 plus one late fee (up to $12.45, see below), about $261.55, and keep the loan from going into default.
If you only find out three months later, three payments are behind: $747.30, plus three late fees. The most common state rule for car loans allows a late fee of up to 5% of the late payment, charged only once the payment is 10 days late, and one fee per late payment. On $249.10 that's up to $12.45 a fee, so catching up takes 3 × $249.10 + 3 × $12.45 = $784.65, and the missed payments may already be on your credit record. Your contract sets the actual fee within your state's limit. Some states allow less: Ohio caps it at $3, Pennsylvania at 2% of the payment ($4.98 here), and Delaware at 5% or $15, whichever is less. North Carolina allows a flat $18, and Texas waits 15 days before any fee.
If the loan goes into default, about $11,027 was still owed after his sixth payment, and the FTC's Notice to Cosigner says you may have to pay up to the full amount, plus late fees or collection costs.

And even in the best case, where he never misses a payment, the $249 a month counts as your debt when you apply for a car loan, apartment or mortgage of your own for the next five years (FTC).

Questions to ask yourself

Could I pay the whole thing, plus fees, without them? Not "probably won't have to". Could you, from your own budget, for the rest of the loan? If the answer is no, the answer to co-signing is no.
Why can't they qualify alone? A lender asking for a co-signer has judged the borrower too risky on their own. You're taking that risk on. Is the reason short-term (no credit history yet) or ongoing (missed payments, income that doesn't cover the payment)?
How would I feel if I had to pay? Picture paying $249 a month for a car you don't own and can't drive. Would you still come to Thanksgiving? If you'd resent them, that cost matters too.
Do I need to borrow myself soon? A new car, a lease, a mortgage? The co-signed payment counts against you.
Would I tell a partner or spouse? If you'd hide it, stop and think about why.

Questions to ask the lender before you sign

The FTC suggests asking these, and getting the answers in writing:

What's the total I might owe if the borrower defaults, including late fees and collection costs?
Will you send me the monthly statements, or agree in writing to tell me if a payment is missed?
Can I have copies of the loan contract and the Truth in Lending disclosure?
Is there a co-signer release? After how many on-time payments, and what else does the borrower need (a credit check, income)? Is it in the contract?
What's the late fee? If a payment is missed, when would you start collecting from me?

Before you sign, the lender must give you a Notice to Cosigner (FTC Credit Practices Rule). It says you may have to pay up to the full amount of the debt, and that the lender can collect from you without first trying to collect from the borrower, using the same methods it could use on the borrower, such as suing or garnishing wages. The FTC notes that the wording can differ where state law makes lenders try the borrower first. In practice that's rare: only one state, Maine, has such a rule, and it has a big exception (below).

What your state adds for co-signers

The federal notice applies everywhere. On top of it, we read each state's consumer credit and surety laws on 2026-09-28. Here is what we found.

Try the borrower first: one state, with an exception. In Maine, a lender may not sue a co-signer until it has used due diligence to collect from the borrower. That rule doesn't apply when the co-signer is "jointly and severally liable", meaning each signer owes the whole debt. Most car and personal loan contracts make co-signers exactly that, so in practice the rule rarely helps (9-A M.R.S. § 3-206). Texas has a narrower rule for guarantors and sureties: a court can't enter judgment against them unless it also enters judgment against the borrower. There are exceptions, for example when the borrower can't be found, has died or is insolvent. A co-signer who signed as a co-maker gets no such protection (Civ. Prac. & Rem. Code § 17.001).
A surety's demand to sue the borrower. In California, Georgia, Illinois, Indiana, Mississippi, Missouri, Montana, North Carolina, Oklahoma, South Dakota, Tennessee, Virginia and West Virginia, a surety or guarantor can demand in writing, once the debt is due, that the lender sue or pursue the borrower. If the lender doesn't act, the surety can be released, fully or to the extent the delay harmed them. North Carolina, Virginia and Tennessee give the lender 30 days to act, Mississippi until the next court term after 30 days, and Georgia three months. Illinois allows the demand only when the borrower seems likely to become insolvent or leave the state. These laws help only a co-signer who signed as a surety or guarantor. Someone who signed as a co-borrower or co-maker owes the debt directly and can't use them. Your signature line and the contract say which you are.
State co-signer notices. Six states require their own notice before you sign, on top of the FTC one. California requires a "Notice to Cosigner" in English and several other languages. Colorado requires a written notice that follows the FTC text. Iowa and South Carolina use a model notice that says you may be sued even though the borrower is able to pay. Maine requires a notice listing what you owe and that late charges can be added. Wisconsin requires either copies of everything the borrower signs or a separate "Explanation of personal obligation".
A chance to catch up before the lender comes after you. In Colorado, the co-signer is entitled to their own notice of the right to cure a missed payment. Without it, the lender can't demand the whole balance from the co-signer or report it on the co-signer's credit report. In Missouri, for loans under its consumer installment loan law (RSMo 408.551 to 408.562), the lender must wait 20 days after sending a right-to-cure notice to the borrower and all co-signers before it demands the whole balance or repossesses. Either the borrower or a co-signer can cure by paying what's past due.
Notice before a repossessed car is sold. In California, everyone liable on a car contract, co-signers included, must get at least 15 days' written notice before a repossessed car is sold. In Georgia, on a car financed through the dealer, the lender loses the right to collect a shortfall after the sale unless it mails a notice, within 10 days of the repossession, that it intends to pursue one (O.C.G.A. § 10-1-36).

If the car is repossessed: the "deficiency"

The baseline in every state is the Uniform Commercial Code rule that the borrower "is liable for any deficiency". If a repossessed car sells for less than is owed, the borrower and the co-signer can both be asked to pay the difference. In the example above, about $11,027 is owed after six payments. If the car then sold at auction for, say, $7,000 (our figure, for illustration), you could be asked for about $4,027 plus the lender's repossession and sale costs.

Some states bar a deficiency on small debts:

State	No deficiency when
Minnesota	total credit $8,100 or less
Connecticut	cash price $4,000 or less; above that, measured against the car's fair market value, not the auction price
Indiana	cash price $4,000 or less (dealer-arranged sales)
Colorado	cash price $3,000 or less (protects everyone obligated, including co-signers)
Utah	cash price $3,000 or less (dealer-arranged sales)
Maine	amount financed $2,800 or less (protects the borrower and any sureties)
Massachusetts	balance $2,000 or less; above that, measured against fair market value
District of Columbia	cash price (or loan proceeds) $2,000 or less
South Carolina	cash price $1,500 or less (dealer-arranged sales)
Kansas, Oklahoma, Wyoming	cash price $1,000 or less (dealer-arranged sales; Oklahoma's figure is adjusted over time)
West Virginia	balance at repossession $1,000 or less
Wisconsin	$1,000 or less owed at default
Missouri	purchase-money loan under $500; otherwise only if more than $500 was financed and $300 or more is unpaid

Most of these limits are well below the price of a typical car, and several cover only dealer-arranged financing, so for most car loans the deficiency rule applies. Two more states add conditions: California allows a deficiency only if a court finds the sale followed the law, and Iowa only after a good-faith, commercially reasonable sale. In the other states we checked, we found no state limit beyond the Uniform Commercial Code. The contract and the type of financing decide which rule applies to your loan. Your state banking agency or attorney general's office can confirm it.

From each state's official code, read 2026-09-28. We couldn't confirm Arkansas, Georgia, Louisiana, Mississippi, New Mexico, Pennsylvania or Tennessee. "We found no state law" means none in the sections we read. Court decisions, mortgages and federal student loans aren't covered. General information, not legal advice.

Co-signer release: don't count on it

For private student loans, the Consumer Financial Protection Bureau (CFPB) says that in some cases a co-signer can be released. Each lender sets its own rules, and three big lenders publish theirs:

Sallie Mae: the student must have graduated, then made 12 on-time payments of principal and interest (or prepaid the same amount), with no payment 30 days late and no hardship forbearance in the last 12 months, and pass a credit review. Parent loans made after May 2026 can't release a co-signer.
College Ave: half of the original repayment term must have passed (on a 10-year term, after year 5), the borrower's yearly income must be at least twice the loan balance, and the borrower must pass a credit review. Only the borrower can apply.
Citizens: the loan must be in full principal-and-interest repayment (interest-only payments don't count), and the borrower must pass a credit review and show income. A turned-down borrower can apply again once every 12 months. Release isn't available on its Student Loan for Parents.

In all three, release depends on the borrower qualifying alone, and a missed payment or a lost job can push it back or rule it out. The exact terms are in the loan agreement, so read them before you sign, not after. For car and personal loans, ask the lender directly; if there's no release in the contract, plan on being on the loan until it's paid off or refinanced in the borrower's name alone.

How co-signing affects your credit

The loan can be reported as your debt, and it counts against you when you apply for credit, even if it's paid on time (FTC).
Missed payments can hurt your credit whether or not you knew about them (CFPB), and a default can go on your credit record (FTC).
You don't own what the loan buys: not the car, not the apartment, not the degree.

Safer ways to help

Give or lend a smaller amount you can afford to lose, for example part of the down payment or the apartment deposit, so they can qualify for a smaller loan on their own. Decide up front whether it's a loan or a gift.
Help them build credit first. The CFPB describes a secured credit card: you put in an amount of cash, for example $500, and can spend up to that amount. Used lightly and paid on time, it builds a credit record in their own name. A credit-builder loan from a bank or credit union is another option the CFPB lists.
Lend it yourself, with an agreement, if you'd rather know exactly what you're risking. Write down the amount, the payments and the dates: see the family loan agreement template.

Car, apartment or student loan?

Car loan for someone with bad credit: the lender has already said the borrower is a risk, and the car loses value as it's driven, so if it's repossessed and sold, the sale may not cover what's left on the loan. The Notice to Cosigner says you may have to pay up to the full amount of the debt, plus late fees or collection costs, and in most states that includes the shortfall after a repossession sale (see the deficiency rules above).
Your daughter's (or son's) apartment: a lease guarantor usually covers unpaid rent and damages. You're bound by what the lease and the guaranty you sign say, including whether your promise carries on into a renewed lease. So before signing, look for words like "renewals", "extensions" or "continuing guaranty", and for an end date or a cap on the rent you'd cover. Texas, for example, sets the rule in law: a guarantor is liable only for the original lease term unless the guarantor agrees in writing to cover a renewal (Texas Property Code 92.021). If the wording isn't clear, ask the landlord to state in writing whether your guaranty ends with the first lease.
Student loan: federal student loans don't need a co-signer. Federal Direct Subsidized and Unsubsidized loans for students have no credit check and no co-signer (34 CFR 685.200). For 2026–27, a dependent first-year undergraduate can borrow up to $5,500, rising to $6,500 in the second year and $7,500 after that (34 CFR 685.203). Only the federal PLUS loans for parents check credit: a parent with an adverse credit history can still borrow by adding an "endorser", the federal version of a co-signer, and having no credit history doesn't count as adverse. Since July 1, 2026, Parent PLUS is capped at $20,000 a year and $65,000 in total per student, and new graduate students can no longer get Grad PLUS loans. A private student loan is the kind that asks for a co-signer; read its release terms (above) before signing.
Boyfriend, girlfriend or friend: the loan doesn't end if the relationship does. Ask yourself whether you'd still pay if you weren't speaking.

How to say no kindly

Keep it short, make it about your rule rather than their worth, and offer what you can do instead:

"I love you and I want to help, but I don't co-sign loans. I can't take on a debt I'd have to pay if things went wrong. What I can do is put $300 toward the deposit, and help you look at a secured card so you can qualify on your own next time."

More wording, for texts and in person: how to say no to lending money and scripts for when someone asks you.

Sources

Sources checked 2026-09-28.

General information, not legal or financial advice. You send every message yourself; we never contact anyone on your behalf.