The Common Law

You Become Responsible When You Co-Sign a Loan

You Become Responsible When You Co-Sign a Loan

My girlfriend wants me to co-sign her car loan. I want to help but am not sure what it means to co-sign. Will I have to make any payments?

Most of us will be asked by relatives or friends to co-sign a loan at some point in our lives. This may be because the borrower does not have a strong credit history. Many times, however, it is because the borrower either lacks the income or assets to qualify for the loan or has bad credit.

Many people who co-sign have the mistaken belief that they are simply helping with the processing of the loan and that the primary borrower is the only person responsible for making payments. This is incorrect.

As the co-signer, you will be fully liable for the debt if the primary borrower (your girlfriend) does not make the loan payments. In addition to the debt itself, as the co-signer, you could also be responsible for paying additional charges, including interest, late fees, and attorneys' fees (if the lender takes legal action to collect on the unpaid debt). Failure to pay any of the owed amount could adversely affect your credit. Furthermore, even if the primary borrower makes payments, your ability to obtain credit may be negatively affected because lenders will consider a co-signed loan as part of your total debt load, which could affect your future ability to borrow.

Also keep in mind that the lender is in the business of evaluating risk, so if the lender refuses to approve a loan without a co-signer, this generally means that the lender believes the primary borrower (your girlfriend) is a bad risk and is likely to default on her loan. The Texas Attorney General's Office reports that a Federal Trade Commission study found that as many as three out of four co-signers are asked to repay loans because the primary borrower goes into default.

Be sure you have weighed all the risks before agreeing to co-sign a loan. If you do decide to co-sign, be sure you can afford to pay the debt in the event that your girlfriend defaults.

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Marrs, Ellis & Hodge LLP,

The material in this column is for informational purposes only. It does not constitute, nor is it a substitute for, legal advice. For advice on your specific facts and circumstances, consult a licensed attorney. You may wish to contact the Lawyer Referral Service of Central Texas, a non-profit public service of the Austin Bar Association, at 512-472-8303 or

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