In general terms, co-signing refers to executing an agreement or other document in concert with another, and should not be confused with "counter-signing", which refers to the act of executing a document as an agent in behalf of another, such as a corporation or other legal person, or as an attorney-in-fact on behalf of one's principal.
Co-signing often involves a promise to pay another person's debt arising out of contract if that person fails to do so. Conversely, co-signing may involve taking on a joint, or joint-and-several, obligation to pay a debt, regardless of whether or not the other co-signer fails to do so. In the first instance the co-signer's obligation may be in the nature of a guaranty, while in the second instance the co-signer's obligation might be described as that of a co-debtor. As with any contract, the decision to co-sign is a personal and business decision made by the co-signer in his or her considered judgment, and if a co-signer dies, the co-signer's obligations transfer to his or her estate.
Many realtors and landlords require a cosigner for college students, people with bad credit (cf. FICO score) or people whose income is less than a certain, low multiple of the amount of rent (often 3.0 or 3.5x, or 28-33%). Other loans typically involving a cosigner are motor vehicle purchase, money loans and mortgages. The statute of frauds existing in most states of the United States requires that any such agreement be in writing and signed by the co-signer in order to be enforceable in a court of law. The legal act or instrument of cosigning is also called a guaranty.
A co-signer is a person who is the guarantor of the contract, especially a promissory note. A co-signer is also known as a surety.
- Robert D. Gifford, Co-signing A Loan Is Risky Business, Fall 2005, Military Money, found at Military Money web site. Accessed January 4, 2008.
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