October 3, 2023

When you co-sign an auto loan, you’re putting your credit on the line for another person. If they don’t make their payments on time, it will negatively impact your credit score. In some cases, it can also lead to repossession of the vehicle. Co-signing a car loan is a big responsibility, so be sure that you trust the person you’re co-signing for and that you’re comfortable with the loan terms. Before you co-sign, it’s important to understand how it will affect your credit and options if the borrower doesn’t make their payments.

1. What Are the Risks Associated with Co-Signing a Car Loan

When you co-sign a car loan, you agree to be responsible for the debt if the primary borrower cannot make the payments. It means that the lender can come after you for the money, and your credit will be impacted if the borrower defaults on the loan. In addition, co-signing a car loan can put a strain on your relationship with the borrower. If they miss a payment or default on a loan, you will be responsible for the debt, and your credit will be impacted. As a result, it is important to think carefully before co-signing a car loan. Make sure that you can afford to make the payments yourself and that you trust the borrower to make their payments on time.

2. Alternatives to Cosigning a Car Loan

One option is to provide collateral for the loan instead of co-signing. It means you would put up something of value, such as a piece of property, as security for the loan. If the borrower fails to make payments, you would be responsible for repaying the loan, but your credit score would not be affected. Another option is to co-sign on a lease instead of a loan. It means that you would be responsible for making sure the monthly payments are made, but you would not be liable for the entire lease amount if the borrower defaults. Finally, you could refuse to co-sign the loan. It could damage your relationship with the borrower, but it would protect your finances and credit score.


Before you cosign an auto loan for someone, it’s important to understand how it could affect your credit. If the borrower misses a payment, it will also appear on your credit report. That late payment could hurt your credit score and make it more difficult to qualify for loans in the future. Additionally, if the borrower defaults on the loan, the lender may come after you for the money. If you cannot pay, the lender could sue you or try to collect the debt through other means. As a result, co-signing an auto loan is a serious responsibility that should not be taken lightly. Before you co-sign, ensure you are comfortable with the risks and confident that the borrower will make their payments on time.