How to Find a Cosigner for a Student Loan

In the private student loan market, lenders evaluate your credit score and financial history. For those with less than stellar credit, having a cosigner can help you secure lower interest rates and qualify for more loan options.

What is a cosigner?

A cosigner is legally responsible for repaying the loan if the primary borrower is unable to do so. The cosigner's name appears on the loan agreement. This means that the loan history will contribute to their credit score along with the primary borrower.

Why a cosigner?

If you are someone with bad credit or no credit at all, you may want to consider finding a cosigner. If you approach lenders without one, they may see your poor credit as a sign of financial irresponsibility. This could disqualify you from some loans and leave you with offers with higher interest rates. With a cosigner, you will generally be offered better rates and have more options. 

Who is a good cosigner?

Good cosigners are able to prove to lenders that they have a strong financial history, one that will continue into the future. This is usually someone with consistent income or employment. In the event that you can't pay back the loan, the lender knows that they will be able to. In addition, a cosigner usually has a high credit score, which helps you secure lower interest rates. 

What are the responsibilities of a cosigner?

The responsibilities of a cosigner should not be taken lightly. The payment history of the loan will contribute to the credit scores of both the primary borrower and the cosigner. It is common to choose a family member or close friend because they are people you can trust to pay if you are unable to. 

Throughout the loan process, you should be transparent with your lender about your current finances, future plans, and the terms of the loan. They can serve as a source of advice and knowledge about a sometimes complicated process. Before you sign a loan, you should know how you will pay it off when the time comes. Discuss this with your lender. This is a good way to build trust between the two of you. 

Solutions if you don't have any

All is not lost if you can't find a cosigner. While having a cosigner is helpful, not everyone is able to find one. If this is the case for you, it is important to improve your credit. 

There are many ways to improve your credit:

1. Don't miss payments: Payment history is one of the biggest factors in your credit score. Consistently making your monthly payments on time can boost your score. Some credit cards allow you to set up automatic payments so you don't forget to pay the bill.
2. Limit your credit: By charging less on credit cards and paying off existing credit, you can raise your score. Credit utilization is taken into account when your credit score is calculated. 
3. Check your credit reports: Occasionally, errors appear on credit reports. If you find errors, you can dispute them and ask the credit bureau to correct them. 
4. Get added as an authorized user: Just like money, credit can be inherited. If your parents have good credit and add you to their credit card as an authorized user, you will inherit their good credit.
5. Consider a credit union: Credit unions offer more flexibility than private lenders when it comes to loan qualifications. This can be a good alternative to traditional private loans.
6. Borrow from friends and family: Another option to the loan market is to borrow directly from friends and family. This allows you to set your own rates and focus on building better credit in the meantime.