Co-Signer Agreements: The Complete Guide with Free PDF Templates

What is a Co-Signer Agreement?

Co-signer agreements are not as common as many other documents but they do have an important place in both corporate and consumer law. These documents may be used on a personal level (for example, for obtaining a loan) or on a corporate level, such as one company co-signing for a loan of another company. Although the former example is far more common than the latter, both can be crucial to those involved.
So what exactly is a co-signer agreement? As the name suggests, this is an agreement between two parties, with one as the main responsible party and the other as the co-signer. While the co-signer does not technically have a responsibility to pay under normal circumstances, if the primary signer fails to make payments, it is the responsibility of the co-signer to then make them. Specifically , the co-signer must pay any debts attached to the agreement if/when the primary signer defaults.
Why would an individual need a co-signer? Typically, a co-signer is needed when the individual applying for credit has little to no credit history or otherwise falls short of prerequisite creditworthiness standards. The most common example of this would be for a young person with little credit history. However, someone with poor credit who is unable to get a loan would also be in with a co-signer. Of course, even those with good credit might choose to get a co-signer for larger loans where the lender requires one in order to make the loan (for instance, some banks won’t make home loans unless there is a co-signer).
Co-signer agreements are legally binding documents. As with any other contract, failure to make payments in accordance with the agreement can have major legal consequences.

Main Elements of a Co-Signer Agreement

A well-crafted co-signer agreement has five critical components: Name of the parties to the agreement. Sometimes, the party that is purchasing something with the assistance of a co-signer loses their job or becomes ill. At this point, the co-signer would have to step in and assume responsibility for the debtor’s payments. For this reason, it’s important that the identification of the parties in the contract is clear. The co-signer’s name, address, social security number, and capturing their signature on the document, will fulfill this requirement. Declarations. This section of the agreement is important as it includes many of the most essential parts of the document. This is where you’ll learn about the original loan amount and payment terms. The information in this part of the agreement will also include the rate of interest, the maturity date, and the loan purpose. It’s crucial that you fully understand the agreement that you are agreeing to co-sign before you add your signature. Main contract. All of the debt and obligations of the loan to be assumed by the co-signer should be stated in this part of the document. It is not acceptable to leave some parts of the contract out. Why? It is because this could put the co-signer at extreme financial risk. Promise. In this section, the co-signer makes an explicit promise to pay the debt in question. The commitment should remain in place until the debt is paid off, so long as all of the other parties to the agreement are still abiding by the terms of the contract. The promise is the binding legal agreement that the co-signer will help fulfill all financial obligations under the loan. Guaranty. This states for the record that the co-signer agrees to pay all funds due – in full – if the borrower fails to make required payments. The lender might agree to give the borrower a small grace period, but should they continue to fail to meet their financial obligation, the co-signer will be legally responsible for making those missed payments. The main intention of this legally binding document is to protect the lender. Indemnification. This is a section in which the co-signer affords protection for the lender against loss, claim, and liability that could occur. If at any time the lender must take action against the debtor to collect on the loan, their legal costs can be reimbursed to them by the co-signer.

Legal Liability of a Co-Signer

The agreement that a co-signer enters into will outline the responsibilities and liabilities that they are obligated to take on. This will include verbiage that stipulates that the co-signer has no right to the assets that are acquired under the loan, or any administrative involvement in the undertakings that the contract covers.
Generally speaking, the main liability that a co-signer has is regarding the amount of the loan. If, for example, a person enters into a mortgage agreement to purchase a home with their spouse, and subsequently the couple has a divorce and they decide to sell the property, the co-signer would be liable for the amount of the loan. If the sale of the property didn’t cover the outgoing loan there would be a risk of the co-signer having to cover the difference.
There are situations when a co-signer can be held responsible to pay back debts such as:
When someone cosigns on a student loan, they are providing their credit history and income as a guarantee that the student will repay the loan. If the student is unable to make payments, the debt will be placed with the co-signer and their credit will be affected. It is the co-signer’s responsibility to ensure that the student is able to make the repayments. While the co-signer will have access to paperwork regarding the loan, they may not be privy to all details without contacting the financial institution that is managing the loan.
If you are a co-signer for a vehicle, you can be responsible if the owner of the car stops making payments. Your permissions under the loan are usually discussed when you sign the document, allowing you to get all necessary information from the lending agency or dealership. If the vehicle is repossessed due to the owner’s delinquency, you will be responsible for ensuring the loan is paid in full. If the vehicle is sold at auction, the bank may make a bid for the vehicle if it is not selling for an amount that will cover the loan. If this happens you will owe the bank money as well.
A person who acts as a co-signer for an apartment or rental lease is just that; a co-signer. If the lease agreement is broken before the expiration of the contract, they will be responsible for paying until the end of the lease. They do not have ownership of the apartment or are entitled to any part of the security deposit unless indicated in the contract.

When Should a Co-Signer Agreement Be Used?

Co-signer agreements find their most common application in the financial world. When applying for a bank loan, whether small or large, it is often a prerequisite that the applicant provide a surety or co-signer who will be equally responsible for the payment of the debt. Children wanting to buy their first car but without sufficient credit history, recent college graduates with jobs but no long-term employment record, and those with poor or no credit ratings need co-signers to help them procure loans. In fact, any applicant with a poor credit history – or even one who is viewed as a high risk – will certainly be required to have a co-signer.
A co-signer agreement can also be used in connection with lease agreements. A landlord might want the intention of a tenant either confirmed or augmented by a surety. Even a corporation renting office space for the first time might want to know the owner has more resources than the stated rental income. In these circumstances , the landlord will require a co-signer who will be liable for any unpaid rent.
Financing a real estate acquisition obviously has financial implications and, in an uncertain economy, can be viewed as being doubly risky where the intent is to hold the real estate for investment purposes. Investors will frequently want some assurance that the debt will be serviced. An investor may therefore be asked to provide a surety in the form of a co-signer. Once again, this document gives the lender the security it needs to lend to an entity whose prospects are not as stable as the co-signer’s. Individuals who want to co-sign on behalf of another are well advised to carefully review the specific terms of any agreement. They should ascertain precisely what sort of liabilities they are committing themselves to.

How to Create a Co-Signer Agreement PDF

A co-signer agreement is a legally binding document, so you need to ensure it is drafted properly. The co-signer agreement should include the following information: the landlord’s and tenant’s names; the names of the co-signer, their social security number, and date of birth; the physical address of the property being rented; the length of the lease (indefinite or term); the monthly rent; what part of damages they are agreeing to pay if the tenant default(s) on the lease, and the names of any occupants allowed to stay in the residence. Once your lease agreement is established, it will be a simple matter of cutting and pasting the relevant text into another document for your agreement. After that, ensure your co-signer is aware of what his/her responsibilities will be during the period of the lease. Once that is done, gather all three of your signatures (yours, the tenant, and your co-signer). You will also need to provide copies to each party to sign, so ensure that you have extra copies of the agreement before proceeding. Go over the details of all three agreements to make sure all parties have signed all documents. Once you have all the signatures you need, you can then convert them all into a single PDF format of your choosing for you and your co-signer to use. All you need to do is select a reliable PDF converter from an online search, download it, open the application, and download the necessary agreement to your computer. Once downloaded, open it and select "Convert" on the Converter’s screen. Add in all co-signer agreements as prompts for your converter and allow it to convert the files into a single PDF. Now that you have your co-signer agreement, anyone who has access to your computer will be able to view it. To ensure that the co-signer agreement is kept private, it’s best to ensure your PDF is password protected using the software of your choice.

Finding Co-Signer Agreement Templates

As previously mentioned, you can find a lot of free downloadable templates, but they may not be a trustworthy resource. It is a good plan to use a trusted website for your legally binding agreements.
There are paid and free websites available on the Internet for legal documents. They also provide advice on what to include in your agreement. Make sure the template you choose is customizable and editable after you download it. When in doubt, go with a paid option by a trusted website . There is a value in convenience and having your questions answered by a trusted source along the way.
Some examples of these template providers are:
• Legal Beagle (free, editable online)
• Rocket Lawyer (paid subscription, downloadable)
• Law District (paid subscription, downloadable)
• Legal Templates (paid subscription, downloadable)
• Legal Zoom (paid subscription, downloadable)
• Panda Doc (free, editable online)