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Understanding Private Loans and Cosigners

Understanding Private Loans and Co-signers

Why is it helpful to have a co-signer?

If you are a student will little or no credit history, it may be difficult for you to qualify for a private student loan on your own. That’s because a good credit score is built with good credit behavior over time. By having a parent or creditworthy person cosign for your loan, you may be able to overcome a short credit history and get:

  • A greater chance of getting approved for the loan
  • The possibility of a lower interest rate
  • An opportunity to establish a credit history

Who should I ask to be my co-signer?

A wide range of individuals can potentially be a co-signer as long as they are credit worthy, understand and accept the responsibilities of being a cosigner, and meet any specific cosigner requirements of the lender. You may want to ask:

  • A parent or guardian
  • A relative such as a grandparent, aunt, uncle, or cousin
  • A spouse
  • A creditworthy individual who is supportive of your goal to achieve higher education

Your cosigner should have good or excellent credit and have adequate income to allow him or her to repay the loan if you do not.

Can my co-signer ever be "released" from the loan?

When someone agrees to be a co-signer on your loan, it’s a major responsibility for them. The student borrower and the cosigner share responsibility for ensuring that the loan is repaid. But it doesn’t necessary have to be for the duration of the loan. Some lenders offer co-signer release- the option of freeing your cosigner (if approved by the lender) from additional responsibility for the loan. In the event of the death or total and permanent disability of the student borrower, the loan can often be forgiven and the cosigner won’t be responsible for repayment, but please check with your lender to be certain.


 

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