Does a Cosigner Have to Be There When Financing?

When you co-sign on a loan, you agree to take joint responsibility for making the loan payments. As a co-signer, you are involved in the initial application, which often means an in-person meeting with the lender. Both the primary borrower and the co-signer have to attend the loan closing and sign all of the documents related to the loan.

Verification

Lenders typically check the credit reports of both signers and co-signers prior to approving loan applications. Legally, a lender can only check your credit score if you consent for the lender to do so. The primary loan applicant cannot check your credit score on the basis of the primary borrower's consent. Therefore, most lenders require you to submit loan applications in person and verify your identity before processing your application. Some lenders allow you to submit applications online or over the phone, but these lenders ask a series of security questions that are designed to establish your identity.

Co-Signer Benefits

You do not need to have a co-signer on your loan unless you cannot qualify for a loan in your own right. Legally, people under the age of 21 must have co-signers for credit card applications unless they are employed. If you have an income but your debt payments exceed more than 50 percent of your gross income, then you cannot obtain further credit. However, you can resolve the debt-to-income issue by adding a co-signer who has high income and low debt levels. Additionally, if you have a low credit score, you can improve your chances of obtaining credit by adding a co-signer with a good credit score to your application.

Contracts

Loan agreements are legally binding contracts under which the lender agrees to lend a sum of money to the borrowers and the borrowers agree to repay that money over a period of time. The signer and co-signer consent to pay interest on the debt and make payments on the loan on a monthly basis. If the loan involves collateral, the signers agree to allow the lender to seize that collateral in the event of a loan default. A loan agreement cannot take effect unless the signer and co-signer agree to terms of the loan and sign the documents.

Considerations

Some people offer to co-sign loans for friends or family members who have been unable to obtain credit. However, if you co-sign on a loan, you should take an active part if the management of that debt. Check the loan balance on a regular basis to ensure the signer has made the required monthly payments and if necessary, make the payments yourself. Missed loan payments cause your credit score to drop and remain on your credit report for seven years. Additionally, you stand to lose whatever collateral you offered for the loan if the signer defaults on the debt.

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