Co-Signer vs. Co-Maker

When applying for a bank loan, what's the difference between a co-signer and a co-maker? If a relative asks you to co-sign/co-make a loan, should you?

What is the extent of a co-signer’s liability in relation to the loan that was co-signed?

He assumes responsibility for the repayment of the loan, including the amortization. By practice, banks will only chase after the co-signer after the principal borrower misses several payments. Assuming the principal borrower could no longer make any payments, the bank MAY file a legal claim against a co-signer, but usually, they will simply foreclose the collateral. Banks would rarely chase after the personal assets of the co-signer.

However, if the co-signer has collateral with the same bank for other loans (separate and distinct from the loan to which he became a co-signor), the bank may require the co-signer to update/rectify the defaulted loan (where he was a co-signer) for the release of any other collateralized property.

Should the co-signer put up collateral or bond?

Usually, it's the principal buyer who puts up the collateral. Banks may ask for additional collateral from the co-signer.

What should a co-signer prepare for the whole loan process?

He should prepare the usual documents required as if they were borrowing on a personal basis. The banks would need this to conduct the same credit investigation as if they were borrowing money themselves.

If the person who took out the loan issued checks to the lender and these checks bounced, will the co-signer be criminally liable?

Banks MAY file a legal claim against a co-signer, but they will usually foreclose the collateral.

What are the things (red flags, warning signs) that a co-signer should look out for when it comes to agreeing to co-signing a loan?

Most local banks would only allow parents of a person to become a co-signer. Banks usually wouldn't allow siblings or business partners to become co-signers because these people would likely prioritize paying their own loans over those they co-signed for.