Final answer:
A loan signer, also known as a cosigner, is a party who pledges to repay some or all of the loan if the original borrower defaults, acting as a safety net and enhancing the borrower's credibility.
Step-by-step explanation:
A loan signer, often referred to as a cosigner, is an individual or entity that agrees to take responsibility for repaying a loan if the original borrower is unable to do so. In the loan package, the cosigner provides additional assurance to the bank, particularly when there is imperfect information about the borrower's ability to repay.
The bank requires a cosigner when the borrower's credit history is not strong enough or when additional security is deemed necessary. Another method to provide security for the loan is through collateral, which could be property or equipment that the bank can seize and sell should the borrower default on the loan.
Therefore, the role of a loan signer is crucial in reducing the risk for the bank by providing a safety net, which in turn may increase the chances of loan approval for the borrower.