Choosing whether or not you will have a co-signer on your refinanced student loan is one of the biggest decisions you will ever make. Ok not really, but it can affect your refinanced loan approval and potentially how much you can save on your interest expense and/or monthly payment. Want to see if a co-signer is right for you? Read on.
What does a co-signer do anyway?
A co-signer is someone who is vouching for you and saying, “Yes! I can make this payment if the borrower cannot.” It is important that you and your co-signer know that when an application has a co-signer, both the borrower and the co-signer will jointly apply for credit and be jointly liable for the requested loan. So, if you don’t make a payment, that will reflect not only on your credit, but your co-signers’ as well.
Who can co-sign?
Anyone can co-sign with you, but you probably shouldn’t ask the guy in line behind you at Starbucks. A co-signer should be someone you know well and who is willing and able to take on the full amount of debt if you cannot. Parents, spouses, or close relatives are often co-signers.
How does applying with a co-signer help your application?
Although you may have good credit, applying with a co-signer who also has good credit and a strong income can ensure that you meet our credit criteria. Adding a co-signer to your loan can help by increasing the likelihood that you will pass our initial credit screening process and can provide you with a lower interest rate on your refinanced loan. Applying with a co-signer means we will use the higher of the two credit scores for qualification purposes. Or another example, say you’ve landed your dream job at a non-profit, with a non-profit salary. Adding a co-signer with a higher income can help you get the best rate and term for your refinanced student loan.
Still have questions about co-signing? Chat with us, or call at 202-524-1115.