A co-signer is someone who agrees to be legally responsible for repaying a loan if the primary borrower fails to make payments. They act as a form of insurance for the lender, using their own credit history and income to back the loan.

Why does a co-signer lower the interest rate?

Lenders base interest rates on risk. If a primary borrower has a short credit history or a low credit score, they are seen as higher risk. A co-signer with a strong credit profile (long history, high score, stable income) reduces the lender's risk, often resulting in a lower Annual Percentage Rate (APR) for the loan.

What are the risks for the co-signer?

Co-signing is a significant financial commitment. If the primary borrower misses payments, the co-signer is 100% responsible for the full amount. Any late payments can damage the co-signer's credit score. Furthermore, the loan amount is added to the co-signer's debt-to-income ratio, which could make it harder for them to get new credit (like a mortgage or car loan) for themselves.

Can a co-signer be removed from a loan?

Sometimes, but it's not automatic. Some loans offer a 'co-signer release' provision, which allows the co-signer to be removed after the primary borrower makes a certain number of on-time payments (e.g., 12-24 months) and meets specific credit criteria on their own. Otherwise, the only way to remove a co-signer is typically to refinance the loan solely in the primary borrower's name.

What's the difference between a co-signer and a co-borrower?

A co-signer simply guarantees the loan. They do not have any ownership rights to the item being purchased (like a car or house). A co-borrower (or joint applicant) also guarantees the loan, but they typically share ownership of the asset and are equally responsible for payments from the start.

Co-Signer Loan Calculator - Compare Savings & APR

Audit: Complete

Formula (LaTeX) + variables + units

This section shows the formulas used by the calculator engine, plus variable definitions and units.

Formula (extracted LaTeX)

\[M = P \frac{r(1+r)^n}{(1+r)^n - 1}\]

M = P \frac{r(1+r)^n}{(1+r)^n - 1}

Formula (extracted text)

$ M = P \frac{r(1+r)^n}{(1+r)^n - 1} $

Variables and units

P = principal (loan amount) (currency)
r = periodic interest rate (annual rate ÷ payments per year) (1)
n = total number of payments (years × payments per year) (count)
M = periodic payment for principal + interest (currency)
T = property tax (annual or monthly depending on input) (currency)
I = homeowners insurance (annual or monthly depending on input) (currency)
PMI = private mortgage insurance (monthly) (currency)

Sources (authoritative):

consumerfinance.gov — consumerfinance.gov · Accessed 2026-01-19
https://www.consumerfinance.gov/
Home — calcdomain.com · Accessed 2026-01-19
https://calcdomain.com/
Finance — calcdomain.com · Accessed 2026-01-19
https://calcdomain.com/finance
Loans & Debt — calcdomain.com · Accessed 2026-01-19
https://calcdomain.com/subcategories/finance-loans-debt
Loan Amortization Schedule — calcdomain.com · Accessed 2026-01-19
https://calcdomain.com/loan-amortization
Loan Payoff Calculator — calcdomain.com · Accessed 2026-01-19
https://calcdomain.com/loan-payoff
Personal Loan Calculator — calcdomain.com · Accessed 2026-01-19
https://calcdomain.com/personal-loan-calculator
APR Calculator — calcdomain.com · Accessed 2026-01-19
https://calcdomain.com/apr

Changelog

Version: 0.1.0-draft
Last code update: 2026-01-19

0.1.0-draft · 2026-01-19

Initial audit spec draft generated from HTML extraction (review required).
Verify formulas match the calculator engine and convert any text-only formulas to LaTeX.
Confirm sources are authoritative and relevant to the calculator methodology.

Verified by Ugo Candido on 2026-01-19
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