Co-Signing a Loan

Co-Signing a Loan; Beware of the Legal Pitfalls and Dangers in a NJ Loan Contract

If you’re asked to cosign a loan in New Jersey, think about it… twice, or more.

Whether you’re being asked to cosign for a car loan, student loan or mortgage, consider all the “what ifs” that could happen before agreeing to cosign.

The cosigner of a loan agrees to be responsible for the loan’s repayment if the borrower defaults on the payments. With most cosigned loans, the lender can request payment from the cosigner at any time, whether the debtor is in default on the loan. Did you know that?

A cosigner will in most cases also be responsible for any late charges, penalties and legal fees associated with a default. The lender in NJ can:

  • Sue you as a co-signer and get a judgment against you
  • Make you disclose your assets, and
  • In extreme cases, force the sale of property you own to pay the debt

In addition, if the debtor defaults, the lender will probably notify the credit bureaus, which can hurt your credit history and credit score.

Questions for Your Attorney

Before cosigning a loan with a friend or family member, consider hiring a lawyer to draw up a contract that spells out each person’s obligations regarding repayment of the debt, and details the steps you’ll take if one person fails to make the required payment. Although this contract won’t provide any relief if the lender decides to pursue you for non-payment of the loan, it will help formalize your relationship with the person for whom you’re cosigning the loan.

Fredrick P. Niemann Esq.

For the reasons I’ve just listed, it’s important that you not cosign a loan unless you have the financial means to pay off the loan should the primary debtor default. If you can’t afford to repay the loan with your own money, you shouldn’t volunteer as a cosigner. You can reach Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at to discuss this topic in greater depth.




Written by Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Monmouth County New Jersey Contract Attorney