A cosigner is someone who signs a loan with another person (borrower) and agrees to pay the loan if the borrower is not able to repay it. In other words, a cosigner accepts an equal responsibility for repaying the loan.
As explained by the Consumer Financial Protection Bureau, a co-signer is usually a parent, spouse or friend who guarantees to pay back the loan if you are not able to repay it. Cosigning can be beneficial for both the borrower and the lender. Having a cosigner reassures the lender that the loan will be repaid, and at the same time, it can help the borrower get a better interest rate on the loan. However, if the borrower pays late or defaults on the payment, it can negatively affect both the borrower and the cosigner’s credit score.
[Last updated in June of 2021 by the Wex Definitions Team]