To sign or not to sign – Deciding to Co-sign a Loan

co-signing a loan

Co-signing is an act of great responsibility and trust. This formality of dual liability enables those otherwise unable to attain a loan to gain the financial capabilities they seek. When approached to co-sign for someone you may want to consider the following tips, provided by Timberwood Bank.

Look at the relationship you and this person currently have.

Are they trustworthy in the capacity you socialize with them? Have any red flags popped up concerning them and their well-being in the recent past? Co-signing affects not only the principal signer, but also the co-signer, holding both to the terms of the contract. It is a fantastic deed to help another achieve their goals, but ensure that you are protected as well when doing so. As a precaution it is a good idea to speak with the loan officer and request communication if the principal signer does default on a payment. In this instance you are aware of the problem before interest and fees begin to accumulate on any missed installment.

Analyze your current financial stability.

If some unforeseen event occurs and you are left holding the bucket for the remaining amount attached to the loan, will you be able to pay it along with your other regular expenses? Take some time to calculate your own capabilities with this loan if you were the sole signer for the account. If the funds don’t work into your budget, or cut the budget too tight, you may consider reducing the loan amount, or postponing the timeline for loan signing. It may be possible to speak with a loan officer to negotiate and see if the co-signer may be responsible for the principal amount only, no interest. Never hurts to ask!

Communicate with both the bank and your fellow co-signer.

Throughout the loan payments your credit and financial reputation will be tied to this agreement. It is much better to help pay a payment or two than have the loan default. By keeping consistent communications with the other co-signer and their bank you can have update on their own financial state, aiding if needed. Since this is a two person liability ensure you reach out to the co-signer often, if they decide this wasn’t for them, you may be left paying the loan yourself.


Co-singing loans opens many doors for new graduates, credit builders, and other friends and family that need assistance. With a good credit score and financial history you could be a great fit to be a potential co-signer.