A co-signer is a person – such as a parent or other close family member or friend – who pledges to pay back the loan if you do not.

Having a co-signer on your loan can be a benefit to both you and your lender because it gives your lender additional assurance that the loan will be repaid. For this reason, your loan’s interest rate could be 10 to 15 percentage points less with a more creditworthy co-signer, which could mean the difference between getting a loan at 5 percent versus one at 15 percent).

If you do not repay your loan, however, your co-signer will be liable for repayment even if the co-signer never drove your car. In addition, any late payments made on the loan would affect both your credit and your co-signer’s credit profile and score.