Should I be a co-signer?
Law You Can Use
Q: What does it mean to be a co-signer?
A: A co-signer is someone who signs a loan or contract, such as a lease, along with another person. By signing one of these documents, the co-signer agrees to be responsible for repaying the loan or fulfilling the contract.
Q: What are the risks of being a co-signer?
A: If you have co-signed a loan or a contract for your friend and your friend later defaults on the obligation, the lender or landlord can sue you for the entire amount of the debt, not just half of it. If the court holds you liable for the debt, it may order your wages to be “garnished” or your bank account to be “attached.” This means money will be deducted from your wages or your bank account until the debt is completely paid.
Q: How does being a co-signer affect my credit rating?
A: A co-signed loan will have the same effect on your credit rating as a loan you take out yourself; it adds to your total outstanding debt. A default in payment also will affect your credit rating the same as it would if you were the only borrower.
Q: Does the creditor/landlord have to try and collect from the party for whom I co-signed before they try and collect from me?
A: No. The creditor or landlord is not obligated to try to collect from the other debtor. The creditor/landlord can and will try to collect from whomever is most apt to fulfill the obligation, which is likely to be you.
Q: Are there differences between co-signing a loan and co-signing a lease?
A: There can be. When you co-sign a loan, it is for a definite amount of money, plus interest, according to the terms of the loan. When you co-sign a lease, however, there may be language in the lease that makes you as the co-signer liable for periods of time in which the lease is renewed, which could lead to greater liability than you anticipated.
Q: How can I decide if becoming a co-signer for a friend is a reasonable risk to take?
A: Anytime you co-sign, you are taking a risk. If, for example, a landlord or lender thinks a co-signer is necessary, this is a warning sign for you. You can certainly ask your friend about his or her employment status, but the risk is still there. With a lease, you can at least try to limit your liability to a fixed period of time, so it is not totally open-ended. Ultimately, however, being a co-signer can cause you to lose not only money, but also a friend.
This column was provided by the Ohio State Bar Association (OSBA) and prepared by Akron attorney Terry Zimmerman, of Kaffen and Zimmerman. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, the OSBA urges readers to seek advice from an attorney.
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