Student Loan Refinancing
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Student Loan Refinance 101
Student Loan Glossary
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Cosigning a student loan refinance with your child can be a great benefit for them, but it also creates some responsibilities for you. If you’re considering helping your child refinance his or her student loans, here are some of the things you’ll want to keep in mind.
Cosigning a student loan refinance works similarly to cosigning any other type of loan or credit card. Adding your name to the application allows the lender to review your credit history and income along with your child’s.
Depending on where your financial and credit situation stands, it could help your child obtain better financing than they could get on their own. However, your responsibility lasts longer than the initial application.
As a cosigner, you agree to be responsible for the loan’s monthly payments if the primary borrower (your child) can’t keep up. In other words, you are equally responsible for paying back the debt that you cosigned.
Additionally, cosigning a student loan refinance adds the loan account to your credit report. This means that when you go to borrow money in the future, prospective lenders will see the student loan balance and include the monthly payment when calculating your debt-to-income ratio, which is an important factor in determining the terms of your loan.
It also means that if your child misses a payment, it can ruin both your credit scores.
As a result, it’s essential that you consider your responsibilities and the potential issues that can arise from cosigning a student loan refinance. If you have doubts about your child’s ability to repay the debt, it may not be worth putting your financial situation at risk. Also, if you already have a high debt-to-income ratio, adding another payment could make it challenging for you to qualify for credit in the future.
Although there are some risks and responsibilities associated with cosigning a student loan refinance, it’s also important to note the ways it can help your child. Here are five reasons to consider a cosign arrangement:
If your child is asking you to cosign a student loan refinance, talk with them about their goals with their student loans, as well as their plan to make payments on time. Also, set expectations about what you’re willing to do and when to refinance again in their own name or remove you as a cosigner.
Find out if your child prequalifies with vetted student loan refinance lenders to see how much they could save.
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Just cosigning a student loan refinance isn’t a guarantee of getting your child the best rate. The best way to do that is to shop around and compare rate offers from multiple lenders.
With the Purefy rate comparison tool, you can do this without needing to visit multiple lender websites. Simply have your child provide information about themselves and their student loans, then compare the rates they qualify for side by side.
Once you find the lenders that offer the best rates, you can add your name to the applications to see the terms they qualify for with you as a cosigner.
If your credit score isn’t quite where you want it to be, consider taking some time to work on improving it before you agree to cosign your child’s loan application. Check your credit score and credit report to get an idea of where you stand and which areas you can address, then take the time to make improvements. This process can take time, but if it helps your child get even better terms, it can be worth it.
Student loan refinancing combines your current loans into a single loan with a new rate and term. See how much you can save by entering your loan information below, or by getting quotes from multiple lenders using Purefy’s rate comparison tool.
Lifetime Interest Savings
New Monthly Payment
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Not all student loan refinance lenders allow cosigners, so as you’re shopping around, check each lender’s website to find out if the feature is offered.
Next, have your child go through the application process and add your name and information along with theirs. When they submit the application, the lender will run a credit check on both of you to determine whether you qualify and what terms to offer you.
You’ll likely need to provide some documents to prove employment, income, identity and other aspects of the application, so make sure you have those on hand when you apply.
Once the lender approves the application, talk with your child about making payments and working toward being able to refinance on their own or remove you from the loan in the future.
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