What is a key risk for a cosigner on a loan?

• A. The cosigner receives all benefit without risk
• B. Only the borrower’s credit is affected by late payments
• C. The loan is automatically forgiven after a lock-in period
• D. The cosigner’s credit can be harmed if the borrower misses payments

Answer: (D)

When a cosigner signs a loan, they share responsibility for repayment. If the borrower misses payments, those delinquencies are reported to credit bureaus and can appear on the cosigner’s credit record too. That means the cosigner’s credit score can drop, just as the borrower’s can, because the loan is viewed as a shared obligation and the payment history affects both parties.

There’s no automatic forgiveness after a lock-in period, and the cosigner isn’t released from responsibility unless the loan is refinanced, paid off, or the lender agrees to release them under its policy. So the real risk to a cosigner is the potential harm to their credit if the borrower misses payments. The other statements either ignore the cosigner’s exposure or misstate how loans and releases work.