If you’re ready to take out student loans to pay for school, you might be stuck when you find out that to qualify, you may need a cosigner. But what is a cosigner and why do you need one?
Not all loans need a cosigner. But, make sure you’re prepared in case you need one, and see what steps you need to take to cover yourself.
What is a cosigner?
A cosigner is someone who agrees to sign onto your loan with you. If you don’t have good credit or any credit at all, your cosigner should have strong enough credit to help you qualify for a loan.
The purpose of a cosigner is not only to help you qualify for a loan, but to also get a lower interest rate on your loan. Generally speaking, the better your cosigner’s credit score, the lower your interest rate.
Because you don’t have the credit history to prove your creditworthiness, a cosigner agrees to pay back your loan in the event you don’t. So if you miss payments and your loan goes into default, your credit will take a nosedive — and so will your cosigner’s.
A cosigner can be anyone, but this person is usually someone you trust — and they should trust you. This could be a close friend, parent, or other relative. They should also have strong credit to qualify for a loan. Cosigners can sign on to different types of loans, like auto loans, mortgages, and private student loans. They aren’t required for federal student loans.
What is a credit score?
A credit score is a 3-digit number that represents the strength of your credit history. It helps lenders decide if you are creditworthy enough to lend money to, whether it’s in the form of a credit card, mortgage, or private student loan.
The higher your credit score, the more likely you are to qualify for a loan and get the lowest interest rate available. The lower your credit score, the less likely you are to qualify for a loan. And if you do qualify, you may face a higher interest rate because of it. That means you’ll have higher monthly payments and end up paying more over the life of the loan compared to someone with a higher credit score.
There are many different credit scoring models, but two popular ones are FICO and VantageScore. Most credit scores are somewhere between 300 and 850. Here’s a breakdown:
| Credit Score | Rating |
| Less than 580 | Poor |
| 580-669 | Fair |
| 670-739 | Good |
| 740-799 | Very Good |
| More than 800 | Excellent |
There are different scores for each bureau, and the three major ones are Equifax, Experian, and TransUnion. What makes up your credit score is often the same set of criteria, including:
- Payment history
- Amounts owed (or credit utilization)
- Length of credit history
- Credit mix
- New credit
While different models weigh each category differently, payment history and amounts owed are generally the most impactful. So if you currently have a loan and make on-time payments every month, you’re establishing a good credit history. This will cause your credit score to go up.
However, if you aren’t current on any of your loans, that means your credit score could be poor. If you tend to max out credit cards and carry a balance over from month to month, that can cause you to have a high credit utilization rate. Lenders see this as risky and might be cautious about lending to you if you aren’t paying your debt.
Strong credit allows you to qualify for loans without needing a cosigner. If you can showcase that you’re responsible with credit, you should be able to take out a loan on your own without the help of someone else.
When to get a cosigner
If you’re in need of a private student loan to be able to afford paying for college, you’ll either need a strong credit history or a cosigner who does.
If you don’t have the credit background to qualify for a private student loan on your own, you’ll want to tap into your resources. See if your parents, other relatives, or someone with a strong credit background is available and willing to sign onto a private student loan with you.
When you apply for a private student loan, having a cosigner can be the determining factor in not only qualifying, but also getting the lowest interest rate available. The lower your interest rate, the less extra money you’ll end up paying on top of what you borrowed. Keep this in mind as you search for potential cosigners.
Alternatives to student loans with cosigners
Not everyone has access to a cosigner. There are student loans without a cosigner available, if you know where to look.
Federal student loans: Before looking into private student loans, apply for federal aid. Most federal student loans don’t require a credit check or a cosigner. But if your parent is going to take out a Parent PLUS Loan, there will be a credit check done. Try qualifying for Direct Loans before taking this route.
Grants and scholarships: The more free money you can use to finance your education, the less you’ll need to borrow in loans. While your FAFSA award letter will detail how much you get in federal grants and scholarships, take a look around your local community for other options. You can also browse based on what you plan on majoring in to see about specific funding opportunities in your future industry.
Boost your credit score: If you need to get a private student loan without a cosigner, work on building up your credit score. If you already have loans or credit cards, continue making on-time payments every month. Lower your credit usage by keeping the amounts you owe as low as possible. You could even try to become an authorized user on someone else’s credit card, preferably someone with a solid credit score who makes on-time payments. You don’t have to use the card to take advantage of any benefits this provides to your credit score.
Many lenders will offer loans to you without a cosigner, but you might not qualify for the best interest rates. Make sure your credit score is in top-notch shape before applying.
When it comes time to apply for private student loans, use Purefy’s rate comparison tool to find the best loan and rates for you.
