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Cosigning and Refinancing

Published on Author Bethany Sims

Cosigning should be approached as a way to save money on interest costs with someone who understands the responsibilities of cosigning a loan. The purpose of having a cosigner should be to maximize your savings and lower your interest rate not to get something you don’t need or can’t afford. Read on to learn more about the different options for having and releasing a cosigner.

Refinancing with a spouse

At Purefy, we are able refinance spouses’ student loans together to get all of the loans on a lower rate and more favorable term. When refinancing loans with your spouse, we determine the interest rate using the higher of the two credit scores to get you the best rate we can offer for your loans. When you refinance, the loans will also be consolidated into a single monthly payment. If you are interested in this option, the only additional documentation needed is your marriage license. Get started by using our Find My Rate tool to see what you can save by refinancing.

Traditional Cosigner

There are two main reasons to refinance with a cosigner. First, refinancing with a cosigner can lower your interest rate if he/she has a higher credit score than your own. Second, a cosigner can allow you to qualify for a loan if your income or credit score doesn’t meet our requirements. If you have a credit score between 670 and 699, then you will need a cosigner with a credit score of 720 or higher to be eligible. Also, if your income is between $25,000 and $41,999, then you will need a cosigner with annual income greater than $50,000.  You can use our Find My Rate tool and input the cosigner’s credit score to see what they can save you by cosigning.

If there is a small difference in interest rates between applying with a cosigner or without, having a loan on your own is the best approach in the long run. When you are looking to make a larger purchase, such as a house, this is good indication to lenders that you have taken care of paying back the money you borrowed.

Cosigner Risk

Cosigners need to be aware that their credit score can be negatively affected if you don’t make timely payments. A cosigner is guaranteeing that if you cannot make the payments, they will. If your cosigner is a parent, this is typically not an issue as they know the risk and are willing to take it on to save their child money. Make sure you assess the risk before agreeing to be a cosigner on a loan or asking someone to cosign for you.

Cosigner Release Options

If you have a cosigner on your existing loan and are interested in refinancing, check our eligibility requirements to see if you can qualify on your own. If you do, you can apply on your own and “release” your existing cosigner on your current loans by refinancing.

For Purefy borrowers who have a cosigner on their loan and want to assume full responsibility, our cosigner release policy requires 12 months of timely payments. If you wish to release your cosigner, there’s no need to reapply – just check our eligibility requirements and contact us directly if you are interested in releasing your cosigner after 12 months. Make sure you check your credit to see if you qualify for the same rate and term. If not, it may be best to keep your cosigner until you have a higher credit score.

What refinancing can do

Both federal and private loans can be refinanced together to get every loan on the same rate and term. We offer 5, 8 and 12 year terms. Our most popular option is refinancing the standard 10 year term to an 8 year term. Shortening your term by 2 years will allow you to get out of debt faster, at a lower cost to you, but will still keep your monthly payments manageable.

Remember, you don’t have to refinance all of your loans. For example, if you have private loans at a great rate – keep those but consider refinancing your high interest rate federal loans. If you work in public service and are enrolled in the the federal forgiveness program, keep your federal loans and refinance your private loans. Review what you owe and the federal programs to decide which loans are best for you to refinance. Remember, once you refinance a federal loan, you forego federal benefits. We have no limit to the number of loans you can refinance but do have a min and max balance of $20,000 – $350,000. We had one borrower refinance 11 loans with the main goal of getting all her loans on the same payment date, which she did. Other borrowers have a couple larger loans they need to pay down through refinancing.

Refinancing, and cosigning, can be what you need it to be. Explore your options and find what works for you. If you have questions about cosigning or refinancing, let us know.

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