Money Smarts Blog

Let’s talk about cosigning.

If you’ve ever been asked to cosign a loan, it probably started with something like:
“I just need a little help getting approved.”
Or my personal favorite:
“I promise I’ll never miss a payment.”

Cosigning can feel like an act of love, loyalty, or “I guess I’m the responsible one here.” And sometimes, it can be a helpful tool. But as a financial coach, I can tell you this with confidence: cosigning is not just signing your name. It’s signing up for risk.

Let’s break it down.

What Does It Actually Mean to Cosign?

When you cosign a loan, you’re telling the lender:
“If this person can’t or doesn’t pay, I will.”

You’re not a backup plan. You’re a full partner in the original plan.

That loan shows up on your credit report, counts toward your debt, and can impact your ability to borrow in the future. Even if you never make a single payment.

Surprise!

The Pros (Yes, There Are Some)

Cosigning can make sense in the right situation.

It can help someone you trust:

• Get approved for a loan
• Qualify for a better interest rate
• Build or rebuild credit

It can be a temporary bridge:

Especially for young adults or someone with limited credit history who just needs a foot in the door.

When done thoughtfully, cosigning can be a boost. But only when the rest of the picture is solid.

The Cons (This Is the Part I Don’t Skip)

Here’s where my financial coach eyebrow goes up.

If payments are late or missed:

• Your credit score takes the hit
• You may get the calls
• You’re responsible for the balance

If they default:

• You’re legally on the hook
• Relationships can get awkward fast and for a long time
• “I didn’t think this would happen” becomes a regular thought

Even if everything goes perfectly:

• Your own borrowing power can take a hit
• Lenders see the cosigned loan as your debt
• A higher debt-to-income ratio can make it harder to qualify for a mortgage, car loan, or other credit in the future

Money has a way of complicating even the best relationships.

When Cosigning Might Make Sense

I usually feel better about cosigning when:

• You trust the person and their financial habits
• They have steady income
• The loan payment comfortably fits your budget if you had to take it over
• There’s a clear plan for refinancing the loan into their name later

And yes, you should talk about that plan. Out loud. Before signing anything.

When You Should Probably Say No

Cosigning is a red flag situation if:

• You wouldn’t be able to make the payment yourself
• The person has a history of missed payments
• You feel pressured, rushed, or guilted
• You don’t fully understand the loan terms

A loving “no” is still loving.

Who You Should (and Shouldn’t) Cosign For

More common scenarios:

• A child or young adult just starting out
• A spouse or long-term partner, with shared finances
• Someone rebuilding credit with a plan

Proceed with caution:

• Friends
• Extended family
• Anyone who says, “Don’t worry about it”

If you’d be uncomfortable asking them for the money later, pause.

My Financial Coach Bottom Line

Cosigning isn’t a favor. It’s a financial commitment.

That doesn’t mean it’s always a bad idea. It just means it deserves a real conversation, a clear plan, and an honest look at your own finances first.

If you’re thinking about cosigning or already have, we’re happy to walk through the pros, cons, and “what ifs” with you. No judgment. No pressure. Just a clear look at the numbers.

That’s what financial coaching is for.

Want to talk it through? Schedule a financial coaching session or stop by one of our branches. We’ll help you decide what makes the most sense for you.