FTC FACTS for Consumers
FOR THE CONSUMER1-877-FTC-HELPftc.govFEDERAL TRADE COMMISSIONCREDITCosigning a Loan
W hat would you do if a friend or relative asked you to cosign a loan? Before you
answer, make sure you understand what cosigning involves. Under federal
law, creditors are required to give you a notice that explains your obligations. The cosigner’s
You are being asked to guarantee this debt. Think carefully before you
do. If the borrower does not pay the debt, you will have to. Be sure
you can afford to pay if you have to, and that you want to accept this
You may have to pay up to the full amount of the debt if the borrower
does not pay. You may also have to pay late fees or collection costs,
which increase this amount.
The creditor can collect this debt from you without first trying to collect
from the borrower.* The creditor can use the same collection methods
against you that can be used against the borrower, such as suing you,
garnishing your wages, etc. If this debt is ever in default, that fact may
become a part of your credit record.
This notice is not the contract that makes you liable for the debt.
* Depending on your state, this may not apply. If state law forbids a creditor from
collecting from a cosigner without first trying to collect from the primary debtor, this
sentence may be crossed out or omitted altogether.
Facts for Consumers
Federal Trade Commission
Bureau of Consumer Protection
Office of Consumer and Business Education
COSIGNERS OFTEN PAY
Studies of certain types of lenders show that for
cosigned loans that go into default, as many as
three out of four cosigners are asked to repay the
loan. When you’re asked to cosign, you’re being
asked to take a risk that a professional lender
won’t take. If the borrower met the criteria, the
lender wouldn’t require a cosigner.
In most states, if you cosign and your friend
or relative misses a payment, the lender can
immediately collect from you without first
pursuing the borrower. In