Co-signing a loan in Canada: what you are really agreeing to
Someone you love asks you to sign so they can get a car loan, a student line of credit or their first card. Saying yes feels like a favour. Legally, it is a promise to pay. Here is what co-signing and guaranteeing mean in Canada, the rights you keep, and a calculator for the number you are really signing up for.
On this page
What could you owe? Co-signer calculator
The balance you would be responsible for
Uses a standard fixed-payment loan with interest compounded monthly. Balance left is what remains after the months paid; payments still to make is the monthly payment times the months left, interest included. Late fees, collection costs a lender may lawfully add, or a variable rate would change the numbers. Your loan agreement has the real terms.
Co-borrower, guarantor or authorized user?
The words get used loosely. FCAC separates them clearly:
| Role | Access to the money? | Responsible for the balance? |
|---|---|---|
| Co-borrower or co-applicant (joint borrower, co-signer) | Yes | Yes, equally responsible for the unpaid balance |
| Guarantor | No, on a credit card | Yes, responsible for the balance |
| Additional cardholder or authorized user | Yes, can make purchases | No; the primary cardholder pays, and the card does not build the user's credit history |
FCAC defines a joint borrower as someone who signs a mortgage, loan, credit card or line of credit agreement with one or more other people, also called co-signing. FCAC notes guarantors are often a parent or guardian of a minor, for example on a card for someone who would not qualify alone. Your agreement is what decides when a lender can turn to you, so read the guarantee wording itself.
Your right to information as a joint borrower
At a federally regulated financial institution, such as a bank or federal credit union, FCAC says every joint borrower has the right to receive:
- information about the interest and other costs they will pay, and
- the same statements the other borrowers receive, on an ongoing basis.
You can give this up, verbally or in writing, so only one borrower receives the documents. If you consent verbally, the institution must confirm it in writing. Think hard before waiving it: statements are how you would find out a payment was missed. Keep receiving them, on paper or electronically.
Collectors can contact co-signers
FCAC's debt collection rules limit who a federally regulated institution can contact about someone's debt. Family, friends, neighbours and employers are generally off limits, with an exception: the lender can contact a person who guaranteed or co-signed the loan, about that loan. The same rules on timing and conduct apply to you: no calls on holidays, none on Sundays outside 1:00 p.m. to 5:00 p.m. unless you consent, none before 7:00 a.m. or after 9:00 p.m. on other days, and no harassment or misleading information. If the debt is sold to a collection agency, provincial rules apply instead.
Credit and your own borrowing
FCAC says creditors may report missed payments to credit reports, and late or missed payments are negative information that may lower a score. As a co-borrower you are on the account, so a missed payment you did not know about can follow you. Ask the lender how the account will be reported for you and whether it will count as your debt when you apply for your own mortgage or loan. If you are building credit yourself, see how to build credit in Canada; if you want to help someone without signing, a secured card is one route they can take alone.
Worked example: the car loan
Arjun co-signs his brother's $20,000 car loan at 8.99% over 60 months. These numbers are illustrative.
- Monthly payment: about $415.07.
- His brother pays for 18 months, then loses his job. The balance left is about $14,909.22.
- If Arjun takes over, the 42 remaining payments total about $17,432.94, interest included.
- On Arjun's $4,200 take-home pay, $415.07 is about 9.9% of every month, for three and a half years.
As a joint borrower, FCAC says Arjun is equally responsible for the unpaid balance. That is the number to say yes or no to, not the favour.
Questions to ask before you sign
- Am I a co-borrower or a guarantor, and what does the agreement say about when you can ask me to pay?
- Will I get every statement? (Say no to waiving it.)
- Will this show on my credit report, and will it count against me when I borrow?
- Can I be removed later, and on what conditions?
- What happens if we separate, if it is a partner? See separation and joint accounts.
For student borrowing specifically, our student line of credit guide covers co-signers and the interest-free federal loans to look at first.
Options people compare
| Option | Your risk | Their benefit |
|---|---|---|
| Co-sign as joint borrower | Full balance, statements, credit reporting | Approval, often a better rate |
| Guarantee | Full balance without account access | Approval |
| Add them as an authorized user | You pay what they spend | Card access, but FCAC says it does not build their credit history |
| Gift or lend a smaller amount directly | Only what you give | Less borrowing |
| Say no | None | They look at secured cards or smaller loans |
These are options to understand, not recommendations. More calculators are on the tools page.
How to decide whether to co-sign a loan in Canada
- Ask whether you would be a co-borrower or a guarantor and read that part of the agreement.
- Work out the monthly payment and the full balance you could owe.
- Check that you could pay it from your own budget for the rest of the term.
- Ask how the loan will appear on your credit report and count against your own borrowing.
- Keep your right to receive every statement and do not waive disclosure.
- Agree in writing with the borrower how missed payments will be handled.
Questions people ask
Is a co-signer responsible for the whole loan in Canada?
Yes. FCAC says a joint borrower, also called a co-signer, becomes equally responsible for repaying the unpaid balance on a mortgage, loan, credit card or line of credit.
What is the difference between a co-signer and a guarantor?
A co-borrower has access to the account and is equally responsible. FCAC says a guarantor on a credit card has no access to the account but is responsible for the balance.
Do co-signers get statements?
At a federally regulated institution, every joint borrower has the right to cost disclosure and the same statements as the other borrowers, unless they give that right up.
Can a collector call me about a loan I co-signed?
Yes. FCAC says federally regulated institutions generally cannot contact third parties about a debt, but they can contact a person who guaranteed or co-signed the loan about it.
Does co-signing affect my credit?
Missed payments can be reported to credit reports and may lower a score, according to FCAC. Ask the lender how the account will be reported for you.
Is an authorized user the same as a co-signer?
No. An additional cardholder or authorized user can spend on the card but is not responsible for the balance, and FCAC says the card does not help build their credit history.
Can I remove myself as a co-signer later?
It depends on the lender and your agreement. Ask before you sign what, if anything, would let you come off the loan, and get the answer in writing.
Looni is being built to read your statements, list the loans, cards and lines you are tied to, and flag payments that change. Read-only, no advice.
Sources
Financial Consumer Agency of Canada, Disclosure of information to joint borrowers: know your rights (joint borrower definition, equal responsibility, right to cost information and statements, waiving disclosure), Joint credit cards (primary cardholder, authorized users, co-borrowers, guarantors), Debt collection: know your rights (contacting a person who co-signed or guaranteed, timing rules, provincial rules for sold debts) and Credit report and score basics (missed payments as negative information). The loan figures are illustrative; the arithmetic is ours.
Buying a car in Ontario? Check which dealer fees can be added to the advertised price before anyone signs.