Here’s What a Cosigner Is (and How to Get a Loan Without One)

In the world of loans, there’s the cosigner kind and the no cosigner kind — and private student loans, unfortunately, are often the cosigner kind. Not always; Funding U makes no cosigner student loans. But here’s an overview of the world of cosigners.

Getting someone else involved in your finances is always tricky. Nowhere is this more apparent than when asking someone to cosign on a loan for you. It’s a big risk, not only for the cosigner’s finances, but for your relationship with the cosigner as well. One misstep in how you handle the loan and you could be in hot water with both your loved one and the lender.

So what exactly is cosigning, and why is it such a big favor to ask? Read ahead for the answers to those questions and more.

What is a cosigner?

When you apply for a loan, the lender will evaluate your credit history and income to decide if you’re a viable candidate. If this information doesn’t convince them that you would be a reliable borrower, they may suggest adding a cosigner.

A cosigner is someone who commits to taking legal responsibility of your debt if you default on the loan. If you stop making payments, the lender will eventually come after the cosigner instead of you. 

Sometimes having a cosigner means the lender will give you a lower interest rate or approve you for a higher amount of money. 

A cosigner does not have to be directly related to you. It can be a friend, co-worker, family member or spouse. The only requirement is that the cosigner needs to have a good credit score and a stable income. 

When you apply for a loan with a cosigner, the lender will conduct a credit check for both you and the cosigner. Both of you have to be approved for the loan to go through.

Once the loan does goes through, it will show up on the cosigner’s credit report and stay there until the loan is paid off. Cosigning on a loan may affect the cosigner’s credit score and possibly make it harder for them to qualify for their own loan.   

After some time has passed, a borrower can ask the lender to release their cosigner from the loan. This is only possible if the borrower has increased their credit score and income enough to qualify for a loan by themselves. If the lender does not approve a cosigner release, the borrower can try to find a lender who will allow them to refinance the loan without a cosigner.

What kinds of loans use cosigners?

You can use a cosigner for most types of loans, including mortgages, auto loans, personal loans, and private student loans. 

Credit cards usually don’t allow cosigners, but they do allow joint accounts with both parties as equal account owners. Federal student loans never require a cosigner, while most private loans do. 

Do you need a cosigner for your student loans?

Borrowers who take out student loans are often teenagers or young adults with little or no credit history. In this instance, it’s difficult for lenders to judge how trustworthy the borrower is and how responsible they will be in repaying their loans. Asking for a cosigner allows a student loan provider to extend a line of credit without taking on significant risk.

What happens if you can’t get a cosigner?

If you can’t find a cosigner, you can try to apply for a no cosigner student loan. Funding U proudly offers no cosigner student loans. 

Why Funding U provides no cosigner student loans

Funding U knows that asking someone to be a cosigner can be difficult, and what’s more, many students simply do not have someone in their circle they could even ask. 

We also recognize that getting an education is the first step to building a solid financial future. We believe that students shouldn’t be penalized for having a limited credit history or not being able to find a cosigner. Borrowers in this position still deserve to finish their education, graduate, and enter the workforce.

Instead of using credit reports to determine eligibility, we rely on a student’s academic history, major, and projected future earnings. 

Building good credit beyond college

If you want to be approved for no cosigner loans in the future, you should also work on improving your credit score.

Having strong credit can also make your post-grad life much easier, even if you never try to apply for another loan. Landlords almost always run a credit check before approving you as a tenant, and cell phone companies will check your credit when you apply for a plan. Car insurance companies may also charge more if you have bad credit. 

Build your credit history by making all your bill and loan payments on time. You can monitor your credit score for free through your bank or credit card provider. You can check your credit report for free at AnnualCreditReport.com

No cosigner student loans from Funding U

At Funding U, we make no cosigner student loans directly to college students. We don’t look at your parents’ credit; we look at you, your academic progress, and your financial plan. Apply online.
Check out our latest blog posts for tips and useful info about managing money in college, navigating the job market, and more.

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