Is It Bad to Co-Sign a Loan with Someone Who Has Bad Credit?

Cosigning a loan means that you will be paying off someone’s loan if he or she fails to make payments for any reason. People often look for a cosigner when they cannot get approved for a loan of a specific amount. Though helping someone you care about through their financial difficulties is a kind and very generous act, it can become a risky venture in the event that the borrower doesn’t follow through with the terms.

With that said, this can be a beneficial set-up for the borrower and a risk-free one for the cosigner if all parties follow through with the terms agreed upon.

As a cosigner, you enter into an agreement where you take on a loan together with the borrower, and therefore become 100% responsible for whatever debt there may be. Until the debt is completely paid off, any monthly payments and/or interest are expected to be paid in a timely manner. With this, there is a potential risk for the cosigner—the lender did not have the confidence in the primary loaner, hence not granting him or her the loan in the first place.

A borrower may need a cosigner if his or her credit score isn’t high enough for the lender, which may suggest to the lender that the borrower had taken out a loan in the past, but failed to pay them on time. Lenders may also look at whether or not the borrower has sufficient income to assess if he or she will have enough money to repay the loan. If either of these factors is deemed insufficient (lenders often have different criteria for loans), then the borrower may not be approved of a loan.

But the risks that come with being a cosigner may not be worth the potential trouble. Let’s say the worst-case scenario happens, and the borrower fails to make a payment. The first thing to consider is whether or not you are able to cover the loan, since you are legally expected to take care of the payments now. It does not matter why the borrower can’t make payments; the lender will not take that into consideration, and come to you—the cosigner—for the money.

The biggest risk you take on, though, is damaging your credit. If the loan doesn’t get repaid as was initially agreed upon, both your credit score and the borrower’s credit score will be lowered. A low credit score can affect your life in a number of ways, including reducing your ability to take out a loan or rent an apartment, and even giving you trouble with landing a job. Learn more about what a bad credit score might mean for you.

In certain situations, a cosigner may be released from his or her responsibilities. Some lenders might allow the cosigner to be released once a certain number of payments are made on time, and a credit check confirms that the cosigner is able to handle the loan on their own.


As a borrower, be very sure that you actually need a cosigner before you ask someone to take on this financial responsibility with you. Assess your finances thoroughly and do the math to see if your income can meet the loan payments and the length of the loan. Also evaluate your job situation to better understand whether or not you expect to be working at the same place over the course of the loan. Making payments should be your utmost priority; your cosigner is doing you a favour after all.

Whenever entering into any sort of loan agreement, ensure that all parties fully understand the terms and conditions of the loan. Since it can be risky to act as someone’s cosigner, be sure the borrower is someone you trust. A family or friend is often a safe bet, but there are things to consider before you commit. The good thing about being a cosigner is that you can potentially help this borrower avoid higher interest loans and from further damaging their own credit.

In the event that you’re having trouble managing your finances and maintaining a positive credit score, urLoan can help you rebuild your credit and regain financial health sooner through our loans. Our approvals are based on employment and verifiable income, unlike any other traditional means of credit score used by such institutions as banks, or taking security on your assets.

Learn more about how urLoan can help you with loans and call us at 1-855-723-5626.

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