Cosigning a Loan Risk Calculator
Estimate the financial exposure from cosigning a loan given the balance and the chance the borrower defaults.
What does the undefined do?
It estimates your expected financial exposure from cosigning a loan, based on the balance and the chance the borrower defaults.
- Inputs: the outstanding balance, the estimated chance of default and the remaining term.
- Output: an expected exposure figure and a gauge of the default risk you entered.
- Method: the outstanding balance multiplied by the estimated chance of default.
Quick answer
Cosigning a 20,000 loan where the borrower has a one in ten chance of defaulting gives an expected exposure of about 2,000, but a real default would leave you liable for the full balance.
What This Calculator Really Does
Cosigning feels generous and costless, but legally you promise to pay the loan if the borrower does not. Lenders only ask for a cosigner when the borrower is a risk, so treat the request as a signal. This tool estimates expected exposure as the balance times the chance of default. That number is a planning figure, not a comfort: if a default happens you can be pursued for the whole outstanding balance, interest and fees, and the missed payments appear on your credit report too, which can block your own borrowing for years. Weigh the expected figure against your ability to absorb the full balance, and consider how the relationship would survive a default before you sign.
The formula it uses
Expected exposure = outstanding balance x default probability as a decimal. The full balance is the worst case.
Worked example with real numbers
A 20,000 balance with a ten percent chance of default gives an expected exposure of 2,000. The worst case, if the borrower defaults, is the entire 20,000 plus interest and fees.
Common mistakes to avoid
- Focusing on the expected figure and ignoring that a default passes the whole balance to you.
- Assuming the money is not really yours, when lenders count a cosigned loan against your own debt-to-income ratio.
- Cosigning for someone without seeing the payment schedule and their plan to cover it.
Assumptions and limitations
Default probability is your own estimate and is assumed constant. The model ignores interest, late fees, collections costs and the credit-score damage of a default, all of which increase the true cost.
Disclaimer
This is an educational estimate, not financial or legal advice. Cosigning creates a binding obligation, so read the loan agreement and consider independent advice before you sign.
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Frequently Asked Questions
How is the undefined calculated?
The outstanding balance is multiplied by the estimated chance of default to give expected exposure, with the full balance as the worst case. The steps panel lists each stage.
What do I need to use the undefined?
The outstanding balance, your estimate of the chance of default and the remaining term. Everything else is built in.
What does the result from the undefined show?
An expected exposure figure in money plus a gauge of the default risk, alongside a reminder about the full-balance worst case.
Does cosigning hurt my credit score?
The loan shows on your credit report. On-time payments can help, but a default, late payment or a high debt-to-income ratio can hurt your score and your ability to borrow.
Can I get out of cosigning later?
Usually only if the borrower refinances in their own name or the lender agrees to a cosigner release. Most lenders are not obliged to release you, so treat the obligation as long term.
Is the undefined really free?
Yes — 100 percent free, no sign-up, and everything runs in your browser.
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