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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|1 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB). Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (TCM) and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicants ability to supply the necessary information for submission.
2 Important Disclosures for CollegeAve.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Information advertised valid as of 2/1/2019. Variable interest rates may increase after consummation.
3 Important Disclosures for Discover.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
4 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
5 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
SunTrust Bank, Member FDIC. ©2019 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
6 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
7 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
8 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|4.23% – 13.23%1||Undergraduate and Graduate|
|4.20% – 11.44%2||Undergraduate, Graduate, and Parents|
|4.84% – 13.49%3||Undergraduate and Graduate|
|4.50% – 10.11%*,4||Undergraduate and Graduate|
|4.25% – 13.25%5||Undergraduate and Graduate|
|5.85% – 6.99%6||Undergraduate and Graduate|
|3.95% – 9.81%7||Undergraduate, Graduate, and Parents|
|4.45% – 12.42%8||Undergraduate, Graduate, and Parents|