Before You Consider a Cosigner (or Become One), Here’s Everything You Should Know

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If you don’t have good credit or any credit at all, you might need some help building it up. Asking a friend or family member to be a cosigner on a loan or credit card might give you the boost you need. But what is a cosigner?

A cosigner is someone who agrees to pay back a debt in your name if you can’t. If you need a cosigner or are considering being one, here are a few things you should know.

What is a cosigner?

If your credit isn’t stellar, you might need help getting approved for a loan. That’s where a cosigner comes in. A cosigner, or guarantor, signs on to a loan with you and agrees to repay the debt if you can’t.

If you’re in the market for a home or renting an apartment, you might need a cosigner. Private student loans also might require a cosigner if your income or credit isn’t high enough. If your credit isn’t up to par, buying a new car or opening a credit card might be hard without a cosigner.

How to get a cosigner

A cosigner doesn’t have to be anyone in particular. Any family member or friend who has good credit and trusts you to hold yourself accountable for paying back a loan can be a cosigner.

If you’re on your way to college and need a student loan cosigner, a parent might be your best option. If you’re hoping to buy a home, your partner can be your cosigner for a mortgage. If your credit score is low and you’re looking to build it up, a credit card cosigner will help. But if you have a hard time finding one, opt for a secured credit card in the meantime.

Make your payments on time and in full. Missing payments or not paying enough will negatively impact your credit report and your cosigner’s.

Benefits of having a cosigner

What is a cosigner good for? Having one can be the make-or-break factor in your ability to secure a loan or credit line. A cosigner with stellar credit can land you lower interest rates, which will result in lower payments and save you money in the long run.

Regardless of the type of loan or credit line, showing lenders and loan servicers that you’re able to make payments on time will build up your credit. A strong credit report will help make you eligible for loans and credit lines without a cosigner in the future.

Friends and family might be unsure about becoming a cosigner for you. After all, if you don’t have good credit (or any credit), they might not trust you when it comes to making payments. But being a cosigner has perks too. Your cosigner’s credit score goes up when you do well, which makes their credit history look even better.

The responsibility of being a cosigner

If your credit score is solid and your credit report is diverse, you could have the opportunity to help someone in need by being a cosigner.

Maybe your kid needs help getting a student loan for college. Maybe your friend needs a personal loan to pay back some other debt or make home improvements. Regardless of the circumstances, being a cosigner comes with a lot of responsibility.

If you’re ever asked to be a cosigner, make sure you trust the borrower who is using your name and credit. Their bad marks are your bad marks, so don’t be afraid to hold them accountable for repayment.

Be as helpful as you can but also be cautious. Remember how being a cosigner could affect you. If your friend or family member fails to pay back their loan on time and in full, you could be stuck with the bill.

If you’re left with someone else’s loan, it could hurt your credit if you don’t make payments. It also could hurt your chances of taking out loans in the future. And the effects can be long-lasting. If you get stuck with a friend’s loan, for example, it might ruin your relationship. Keep all these risks in mind before deciding to become a cosigner.

Cosigners are helpful but not required

While it might be helpful to have a friend or family member sign on to assist you with loans or credit checks, it might not be necessary. Make sure you talk about all your options with your lender or issuer to find out if having a cosigner is a must.

If you have the opportunity to move on without a cosigner, take it. It’s better to build your credit on your own without anyone else being responsible for your debt. If you do need a cosigner, remember that you’re accountable for the loan.

In the event that you can’t make a payment or you’re running late, talk to your issuer about your options as soon as possible. Missing payments can hurt your credit report for up to seven years. Both you and your cosigner will be impacted by missed or late payments, so avoid them at all costs.

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