Which term refers to the act of signing for another person's debt which involves a legal obligation to make payment should that person default?

• A. Co-signers
• B. Closing Costs
• C. CD
• D. Charitable Contributions

Answer: (A)

Co-signing is taking on legal responsibility for someone else’s debt. When you sign as a co-signer, you promise to pay the loan if the primary borrower can’t, so the lender has two people backing the debt. That obligation can appear on your own credit report and affect your credit score and borrowing power. Lenders use a co-signer to reduce risk when the borrower’s credit history or income isn’t strong enough to qualify alone. Because of this, the act of signing for someone else’s debt carries real financial responsibility: you could be required to make payments and see your credit affected if the other person defaults. This is different from closing costs, which are upfront fees at loan closing; a certificate of deposit, which is a bank product; or charitable contributions, which are donations.