Cosigners are like pinch hitters in baseball—if a student’s credit falls a bit short, they’ll step up to the plate and help secure a loan. Family and friends willing to be cosigners play a vital role in helping students with little to no credit history cover education costs with private student loans.
Cosigning also helps students establish credit history while offering a unique opportunity to diversify your credit. Having a variety of accounts may improve your score, so cosigning a student loan can work in your favor and the primary borrower’s.
It’s important to have confidence and trust in the borrower when making this large financial agreement. If you’re looking to become a cosigner, take a look at what’s generally expected of you during the application process.
Meeting the basic requirements
You don’t have to be financially flawless, but most lenders cover the basics:
- Age: Cosigners generally need to be 18 or older.
- Income: Verify your income by providing employer information, pay stubs, bank statements, and/or other financial documents as part of the application.
- Proof of Citizenship or Permanent Resident Status: This can be a Social Security Number or a US resident document.
- Credit History: The lender will need to run a credit check to review your credit history.
- Monthly Obligations: Rent, mortgage, or car payments will be part of how lenders evaluate a your debt-to-income ratio (if needed).
Signs of a strong cosigner
You should demonstrate a stronger financial history than the primary borrower. The stronger you look to a lender, the better your chance for a low interest rate. In addition to demonstrating a healthy debt-to-income ratio.
Once you’ve submitted your cosigner application and all the requested documents, the process is relatively quick and straightforward. The first step is completing a shortened loan application, which will include your latest paystubs to demonstrate your income. Next, you’ll authorize a hard credit inquiry. Once the underwriting team decides you’re a good fit, you’re nearly done. The primary borrower finalizes his or her application, you both sign for the loan, and you’re good to go!
There’s no doubt a cosigner can be a lifesaver on a student’s educational journey. If you’re ready to sign on the dotted line, remember that establishing clear communication and expectations about how the loan will be used, repayment plans, payment progress, and what to do if financial hardship arises will keep everyone’s solid credit and relationship intact.
Finally, researching your lender's timeline for releasing a cosigner will lay a solid foundation for the future so everyone can rest easy knowing the generous act of cosigning is being met with the thoughtfulness and consideration it deserves.