Co-signing a personal loan is not merely providing a character reference. Under FTC regulations, a co-signer is 100% legally liable for the full debt if the primary borrower defaults.
1. Co-Signer Checklist & Protective Measures
- Credit Score Impact: The entire loan balance appears on both the primary borrower's and co-signer's credit reports.
- DTI Inflation: The monthly obligation reduces the co-signer's borrowing power for future auto or mortgage loans.
- Co-Signer Release Clause: Ensure the loan agreement features an automated release provision after 12–24 consecutive on-time payments.