How to Find a Co-Signer

How to Find a Co-Signer

BIG Ideas:

  • A co-signer is someone who agrees to share responsibility for a loan with you.
  • When choosing a co-signer, ensure it’s someone you trust with a strong credit score and steady income.
  • A co-signer may be responsible for the loan until it’s paid in full or refinanced, though some lenders may allow you to release the co-signer after you meet certain eligibility requirements such as making consecutive on-time payments.

College is a huge milestone. It’s also your first real crack at independent life. You’ll find your people, set your schedule, and make your own decisions. There is, though, one thing you may not be able to do on your own – pay for college.

College isn’t cheap and if you don’t have a college fund or other money set aside, you may have to get a private loan to help bridge the gap where financial aid leaves off. But to get that loan, you’ll need a good credit score. That’s not so easy when you’re young and don’t have a history of paying back loans or a steady income.

So, what can you do?

You can get a co-signer, which is someone who agrees to share responsibility for a loan with you.

Know What’s Involved with Choosing a Co-Signer

A co-signer can help you qualify for a loan and save on interest by qualifying for a lower interest rate if they have a good credit score. But before you choose yours, it’s important to understand the responsibilities involved.

When you choose a co-signer, you’re asking them to share responsibility for your debt.

So, if you default on your student loan or pay late, your co-signer is responsible for the payments, late fees, and any penalties. In addition, their credit score can be negatively impacted. It could also limit their ability to qualify for other credit they may need to reach their goals.

So, as you can see, it’s a big ask, which is why you need to ensure you choose the right person. It should be someone you trust who has a strong credit score, a steady income, and a low debt-to-income ratio to help you qualify for the loan.

How to Ensure Co-Signer Success

You’ll be financially tied to your co-signer, so it’s important that you fully understand what you’ve asked them to do and maintain a strong relationship. Here are some ways you can accomplish that:

  • Be open and honest. Share your financial situation with your co-signer, how much you will borrow, and how you’ll repay the loan, including your repayment terms.
  • Show your appreciation for their commitment. Your co-signer could be on the loan until it’s repaid, though some lenders may allow you to release the co-signer once you can demonstrate certain requirements such as a history of making on-time payments and a qualifying credit score.
  • Make sure you’re ready to make payments. Create a budget to ensure you always have the money to make your payments.
  • Save. Start saving money when you can to get a head start on your payments when you graduate.
  • Communicate. Let your co-signer know the status of your loan and your history of making payments.

Having a co-signer is a great way to help you afford college. Make sure you know what’s involved, choose your co-signer carefully, and do all you can to make your payments on time.