Definition
Co-signer is an individual who signs a loan or financial agreement along with the primary borrower, agreeing to assume legal responsibility for repayment if the borrower fails to pay.
Why It Matters
Co-signers provide lenders with additional security and often enable borrowers with limited credit history to obtain loans. However, co-signing carries risk: the co-signer is fully liable if the primary borrower defaults, which can affect their credit and finances.
Example
For example, a student with limited credit applies for a car loan. A parent co-signs the loan. If the student misses payments, the parent is legally required to pay the remaining balance to avoid default.