About Co-Signers and Loans

by Amanda McMullen, Demand Media

    Someone has asked you to co-sign a loan so she can buy a house, or perhaps a car. You want to help, and your friend swears she is good for the money, but you don't really understand what it means to act as a co-signer. Before you pick up that pen, find out what you're getting into and consider the situation from all angles.

    How Does Being a Co-Signer Affect a Mortgage Application?

    Lenders consider an applicant's credit score, debt-to-income ratio and available assets before making a decision about a loan application. If an applicant is lacking in one of these areas, adding a co-signer can make up the difference in the eyes of the lender. Both the primary borrower and the co-signer will be responsible for all the mortgage debt, but only the primary borrower owns the home.

    Can a Co-Signer Get Homeowner's Credit?

    As a co-signer, your credit score depends on someone else's behavior. Still, because you are not a lender, you have no right to pull the homeowner's credit report and check up on him. According to the Federal Trade Commission, you can ask the lender to let you know if the homeowner misses a payment, but he doesn't have to agree to the arrangement.

    Can a Co-Signer Refinance a Car?

    A co-signer can't refinance a car on his own because he doesn't own it. If the borrower gives up on the payments and decides to let the co-signer have the car, the co-signer can refinance the car in his own name. A co-signer can also refinance if the primary borrower is on the new loan with him.

    Can an Owner Sell His Car Without the Co-Signer's Signature?

    The co-signer's name isn't on the car's title, and he doesn't have any claim over it. The car's owner can sell it any time he wants without the co-signer's knowledge or permission. If the car is still financed, the seller must pay off the loan before he can give the title to the new owner, which will take the debt off the co-signer's credit report.

    How Long Before a Co-Signer Can Get Off a Car Lease?

    When you help someone get a car lease, you are in for the long haul. The only way to take your name off the lease is through a refinance. The borrower can refinance a lease without a co-signer at any time, but the lender will only agree to it if the borrower qualifies for the loan by himself. The borrower can also refinance with a different co-signer to get you out of the lease.

    About the Author

    Amanda McMullen is a freelancer who has been writing professionally since 2010. She holds a bachelor's degree in mathematics and statistics and a second bachelor's degree in integrated mathematics education.