What term describes the act of taking responsibility for someone else's loan?

The act of taking responsibility for someone else's loan is best described as co-signing. When an individual co-signs a loan, they are essentially agreeing to take joint responsibility for the debt alongside the primary borrower. This means that if the primary borrower fails to make their loan payments, the co-signer is legally obligated to fulfill those payment responsibilities.

Co-signing often occurs when the primary borrower has insufficient credit history or a low credit score, and the lender requires an additional party to ensure the loan is repaid. Co-signers help increase the chances of loan approval and may also secure more favorable loan terms due to their typically stronger credit profile.

This unique relationship emphasizes the shared financial responsibility between the borrower and the co-signer, making it crucial for the co-signer to understand the risks involved, including the impact on their own credit if the loan is not repaid on time.