Which term describes the act of signing for another person's debt, creating a legal obligation to pay if they default?

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Prepare yourself for the GFL Financial Literacy Test. Study with flashcards and multiple choice questions. Each question comes with helpful hints and thorough explanations to aid retention. Get ready for your exam and achieve success!

Multiple Choice

Which term describes the act of signing for another person's debt, creating a legal obligation to pay if they default?

Explanation:
Signing for someone else’s debt means you agree to be legally responsible if they can’t pay. This arrangement is called cosigning, and the person who signs is a co-signer. Because you guarantee the loan, the lender can go after you for missed payments, and the debt can affect your credit as well. The other terms don’t fit because they describe different ideas—delayed gratification is about waiting for rewards, marketing strategies are about promoting products, and a budget is simply a spending plan.

Signing for someone else’s debt means you agree to be legally responsible if they can’t pay. This arrangement is called cosigning, and the person who signs is a co-signer. Because you guarantee the loan, the lender can go after you for missed payments, and the debt can affect your credit as well. The other terms don’t fit because they describe different ideas—delayed gratification is about waiting for rewards, marketing strategies are about promoting products, and a budget is simply a spending plan.

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