How Do I Know if I Need a Co-Signer?

Do I Need a Co-Signer

BIG Ideas:

  • A co-signer may not only help you qualify for a private loan; but also, could help you get a better rate, which ultimately can save you money.
  • The co-signer on your student loan is legally and financially responsible for making the payments on the loan if you’re unable to make the required payment.
  • Some lenders allow the co-signer to be released from the loan once you’ve demonstrated a sufficient ability to repay the loan on your own.

You’re doing it! You’re making college possible. But before you saddle up that backpack or fire up your dorm room shopping cart, you need to get that tuition bill paid. To do that, you may need a private student loan.

Getting a loan, especially one with a great rate, requires you to have good credit. But, at this stage of your life, you might not have the credit history or the right score to make it possible.

There could be a good solution – getting a co-signer.

You’d be in good company since the majority of private student loans are co-signed by a parent, other relative, or spouse.

Why add a co-signer?

A co-signer is not just for those who don’t qualify on their own. You could qualify based on your credit score, but if a co-signer has a higher credit score they could help you get a better rate and more favorable terms. That means you’ll pay less in interest. In fact, if you have a co-signer, most lenders will consider the best credit score and history in making you an offer on the student loan.

Things to consider

Before you get your co-signer to sign on the dotted line, there are some things you both should know:

  • The co-signer on your student loan is legally and financially liable for making the payments on the loan if you’re unable to make the required payments for any reason.
  • If you fail to repay your loan, it can create problems for your co-signer and harm their credit history as well as yours, not to mention what it might do to your relationship.
  • Student loans are a long-term commitment anywhere from 10 – 20 years. That means, you could be joined with your co-signer for the entire time you’re repaying your loan. So, if you do ask someone to co-sign, make sure it’s someone you’ll stay connected with well into the future.

Releasing a co-signer

Some private student loans allow the co-signer to be released from the loan once you’ve demonstrated a sufficient ability to repay the loan on your own.

That usually involves making a number of consecutive on-time payments, usually 2-3 years, and by undergoing a subsequent additional credit check to see if your credit history and income are sufficient to pay the loan on your own and release the co-signer from their obligation on the loan.

Make sure you and your co-signer fully understand if co-signer release is offered and, if so, what will have to happen in order to qualify for it.

We’re here to help you understand all your options

For more than 40 years, Brazos Higher Education has been helping make education possible. As a Texas non-profit, we can offer you BIG savings on a wide range of private loans for students and parents. Contact us today.