What to consider before co-signing a loan

At some point, most of us hear it.

“Hey… would you mind co-signing a loan for me?”

It might come from your child, a grandchild, a sibling, or even a close friend. And in that moment, your heart wants to help. After all, co-signing can feel like a simple way to give someone a leg up. But before you sign on the dotted line, it’s important to understand exactly what co-signing a loan means. Spoiler alert: it’s a much bigger commitment than many people realize.

What Does It Mean to Co-Sign on a Loan?

When you co-sign a loan, you’re not just vouching for someone’s character. You’re agreeing to be legally responsible for that debt. In the eyes of the lender, you're just as responsible for the loan as the primary borrower. That means:

•    If they make every payment on time, great.
•    If they miss payments or stop paying altogether, the responsibility falls on you.

There’s no “backup” role here. A co-signer is fully on the hook from day one.

How Co-Signing Can Affect Your Credit

One of the biggest surprises for co-signers is how much a loan can impact their own credit score.

Here’s what happens:

•    The loan appears on your credit report
•    Any late or missed payments affect your credit score
•    The debt counts toward your debt-to-income ratio, which can impact your ability to qualify for future loans, mortgages, or credit cards

Even if you never plan to make a payment, the loan still belongs to you as far as credit bureaus are concerned.

Why Lenders Ask for Co-Signers

Most lenders, including those in South Carolina often require a co-signer when a borrower:

•    Has limited credit history
•    Has a lower credit score
•    Has high existing debt
•    Is young or new to borrowing

A co-signer provides extra assurance that the loan will be repaid. From the lender’s perspective, it reduces risk. From your perspective, it increases responsibility.

Questions to Ask Before You Co-Sign

Before agreeing to co-sign a loan, take a pause and ask yourself a few honest questions:

•    Could I afford to make the payments if needed?
•    Am I comfortable taking on this debt long-term?
•    How will this impact my future financial plans?
•    Do I trust this person’s ability—and commitment—to repay the loan?

It’s also smart to ask the borrower about their budget, income stability, and repayment plan. This isn’t about mistrust—it’s about protecting both of you.

A Safer Way to Support Someone

At SAFE, we believe financial support should come with financial education.

In some cases, there may be alternatives to co-signing, such as:

•    Secured loans
•    Smaller loan amounts
•    Financial counseling and budgeting support

These options can help borrowers build credit without putting a loved one’s finances at risk

Co-signing a loan is an act of trust (and love), but it’s also a serious financial decision with long-term commitment. If you’re considering co-signing, take the time to understand the risks, ask questions, and explore all available options. And if you’re unsure, talk with a trusted financial professional at SAFE before signing the dotted line.

Because helping someone financially should never mean hurting your financial health in the process.