4.2.9 Joint borrowing

From: Financial Consumer Agency of Canada

Sometimes one person may not qualify for a loan, and may need to have someone else co-sign for the loan. Joint borrowing is a situation in which two or more people borrow money together.

Co-signing for a loan, credit card or line of credit with another person is a big responsibility. As a joint borrower, you are equally responsible for repaying any balances owing on the loan. If one borrower doesn't pay the debt, the lender can demand that any borrower listed in the loan or credit agreement pay the entire amount.

Before you sign as a joint borrower:

  • Ask yourself if you can afford to repay the loan if the person you have co-signed with doesn't repay it.
  • Be aware that if that person doesn't repay the debt in full and on time, your credit rating could be reduced or a debt collector could contact you to recover the money.
  • Know your rights and responsibilities before signing anything. Read the loan agreement carefully and ask the lender about anything you don't understand.

As a joint borrower:

  • Make sure you get copies of all agreements and account statements. You have the right to receive the same information and statements that the other borrowers receive.
  • Consider asking the other borrower to obtain insurance to pay back the debt in case he or she becomes ill or dies. The joint borrower can name you as the beneficiary on a life insurance policy for an amount that will allow you to pay back the loan.
  • Once the loan has been paid back, get confirmation in writing from the lender that the debt has been paid in full and that you are no longer responsible. For a mortgage or other charge against your property, you should request a discharge of the mortgage from the lender. (There may be a fee for this document.)
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