When Do I Need a Cosigner for a Loan?
September 17, 2019
Some of life’s sweetest happenings come in pairings. On this list are matching socks, milk to cookies, and, perhaps, the cosigner to your loan. Obtaining a loan can be a process all its own but doing so with a cosigner can not only alleviate stress but make you a more viable borrower. Getting a loan doesn’t have to be an undertaking for just one person—in fact, it can be an uplifting process with a person you respect and trust.
What does cosigner mean?
A cosigner is a person you (the borrower) elect to assume your debt should you become unable to fulfill your repayment duties. Regardless of how much or little the cosigner pays, the borrower is still responsible for future payments. Most importantly, your cosigner is equally as responsible for loan repayments as you are.
Who can be a cosigner?
A cosigner can be anyone, but this title is best given to people you trust, who have good credit, and consent to assisting you in making payments should you become unable. Your cosigner must have a credit history that demonstrates they are not only able to make payments on loans but are also able to pay off debts in full.
Typical cosigners include parents, legal guardians, friends, family members, your spouse, or generally anyone you have a mutual trust and ability to have open financial discussions. Be sure whoever you select as your cosigner is comfortable considering your loan as their own.
Who might need a cosigner?
From getting a personal loan to an auto loan, having a cosigner makes you more appealing to lenders. Not only this but having a cosigner can make obtaining a loan more possible if you’ve had a difficult credit history.
Lending companies like to be assured that the money they give out will return to them. With this in mind, cosigners are an appealing option because they give companies confidence that someone else in the lender’s life can also pay them back promptly.
You might want to take out a loan with a cosigner if you:
- Have a lower credit score
- Don’t have a credit history
- Are seeking out your first loan
- Are currently unemployed
- Have previous or present payment delinquencies
The benefits of having a cosigner
The benefits of having a cosigner stretch beyond being granted the loan you desire. With a cosigner, lenders are more likely to give you more flexibility on the type of loan, more flexibility with your repayment plans, make you more eligible for loans, and even lower your interest rates. These perks are especially possible when you elect a responsible cosigner.
Longer-term, having a cosigner for loans could aid in nourishing the borrower’s credit history if they make every payment in full and on time.
Your cosigner is there to help hold you accountable for payments you promised to make good on. In doing this, they are assisting you in building a strong and more stable credit history.
Now, when should I get a cosigner?
You know what a cosigner is and who makes for a good one, but now the question is when and how to get a cosigner?
Generally, finding a cosigner is a good idea when you are confident you can pay back the amount you are borrowing but are struggling to get approved for whatever reason. Your cosigner is not be selected to pay your loan for you. Rather, your cosigner is a reassurance to your lender that someone else in your life believes so fully in your ability to repay a loan that they will assume the liability of repayment.
Where should I look to find one?
Your cosigner is less of a security blanket and more of a support system to help you rise to financial occasions. They are investing in you just as much as your lender. Be sure your cosigner knows:
- The amount you desire to borrow
- The term of the loan
- The annual percentage rate, interest rate, and monthly payment
- How you intend to pay for the loan/from where your income is derived
Just as you need to be transparent with your cosigner, so too does your cosigner with you. Be sure to ask your prospective cosigner if:
- They can assume your loan as their own
- They have a strong credit history
Keeping the above in mind is a great way to get the support you need and find a cosigner who will help in your financial growth and success.
Looking for more flexibility with your next loan application?
Illinois Lending is happy to work with you and make obtaining your next loan a smooth process. Whether you’d like to visit our store in person or easily apply online is up to you.
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