When someone co-signs for another person’s loan both the original signer and the co-signer are jointly liable for the debt
A cosigned debt is where the third-party cosigner agrees to be personally liable for another called the first-party borrower. The cosigner agrees to this arrangement usually because the first-party borrower would not otherwise qualify for the loan.
By securing a cosigner, the lender now holds a better position relative to the repayment of the loan. The risk of default has been minimized by the consignors’ superior creditworthiness and by the fact the lender now has two borrowers legally responsible for the repayment rather than one.
For example, a father agrees to cosign for his son’s first car loan because the son lacks a sufficient credit history to qualify for the loan on his own. If the son defaults on the car loan, the lender will legally pursue the consigner to repay the loan.
Not only does the cosigner assume liability for the son’s debt, but the co-signer’s own creditworthiness can be affected by increasing the amount of debt he has accrued.
