What Is a Cosigner, and Should You Consider (or Become) One?
A cosigner is a family member, friend or someone else who agrees to take legal responsibility to pay back a debt in your name if you can’t. They can help you qualify for credit and borrow it at more attractive terms or in higher amounts, but they put their credit report at risk to do so.
If you don’t have good credit or any credit at all, you might need some help building it up. Asking a cosigner to join your application for a loan or credit card might give you the boost you need.
But what is a cosigner exactly, and what are the pros and cons of having one? Here are a few questions we’ll answer below:
What is a cosigner?
Cosigners, also known as guarantors or endorsers in some cases, should be individuals with steady income and employment who could handle repaying your debt if you struggle on your own. They have good or better credit to help you qualify and score especially low interest rates. They also don’t have their own debt so that helping to repay yours, if necessary, won’t be troublesome.
If you’re in the market for a home or renting an apartment, you might need a cosigner. Private student loans too might require a cosigner if your income or credit isn’t high enough. If your credit isn’t up to par, buying a new car or opening a credit card might also be hard without a cosigner.
Reasons you might need a cosigner
- Credit score or income is too low
- Credit or employment history is too short
- Credit report shows a variety of other debt or a checkered history in repaying it
- Residency status requires applying with a citizen or permanent resident cosigner
Who can be your cosigner?
A cosigner doesn’t have to be anyone in particular. Any family member or friend who has good credit and trusts you to hold yourself accountable for paying back a loan can be a cosigner.
- If you’re on your way to college and need a student loan cosigner, a parent might be your most logical option.
- If you’re hoping to buy a home, your spouse or partner can be your co-borrower or cosigner for a mortgage.
- If your credit score is low and you’re looking to build it up, a credit card cosigner will help. (But if you have a hard time finding one, you might opt for a secured credit card.)
No matter who your cosigner is, make your payments on time and in full. Missing payments or not paying enough will negatively impact your credit report and your cosigner’s.
What are the benefits of having a cosigner?
What is a cosigner good for? Having one can be the make-or-break factor in your ability to secure a loan or credit line. A cosigner with stellar credit can also land you lower interest rates, which will result in lower payments and save you money in the long run.
Regardless of the type of loan or credit line, showing lenders and loan servicers that you’re able to make payments on time will build up your credit. A strong credit report will help make you eligible for loans and credit lines without a cosigner in the future.
Friends and family might be unsure about becoming a cosigner for you. After all, if you don’t have good credit (or any credit), they might not trust you when it comes to making payments.
But being a cosigner has perks too. Your cosigner’s credit score goes up when you do well, which makes their credit history look even better.
How to convince a cosigner to join your application
- Explain why you’re borrowing
- Share a detailed plan for repayment
- Talk about how you’d overcome potential challenges in repayment
- Set a goal for cosigner release, either through debt payoff or refinancing
What’s the responsibility of being a cosigner?
If your credit score is solid and your credit report is diverse, you could have the opportunity to help someone in need by becoming a cosigner.
Maybe your child needs help getting a student loan for college. Maybe your friend needs a personal loan to pay back some other debt or make home improvements. Regardless of the circumstances, being a cosigner comes with a lot of responsibility.
If you’re ever asked to be a cosigner, make sure you trust the borrower who is using your name and credit. Their bad marks are your bad marks, so don’t be afraid to hold them accountable for repayment.
Be as helpful as you can, but also be cautious. Remember how being a cosigner could affect you. If your friend or family member fails to pay back their loan on time and in full, you could be stuck with the bill.
If you’re left with someone else’s loan, it could hurt your credit if you don’t make payments. It also could hurt your chances of taking out loans in the future, especially if the outstanding balances throws your debt-to-income ratio out of whack.
Unfortunately, the effects can be long-lasting. If you get stuck with a friend’s loan, for example, it might ruin your relationship. Keep all these risks in mind before deciding to become a cosigner.
Reasons you shouldn’t become a cosigner
- Your credit history won’t help the primary borrower qualify for friendly terms
- Your finances can’t withstand repaying the borrower’s debt if they become unable to
- You have an upcoming personal finance goal, such as buying a home
- You don’t want to mix money and family, putting important relationships at risk
Keep in mind that you could help the primary borrower access funding without becoming their cosigner. You could help them build credit, perhaps by allowing them to be an authorized user on your credit card. You might even consider the concept of borrowing money from friends, if you’re willing to be the lender yourself.
Can you get a loan without a cosigner?
While it might be helpful to have a friend or family member sign on to assist you with loans or credit checks, it might not be necessary. Make sure you talk about all your options with your lender or issuer to find out if having a cosigner is a must.
If you’re in the market for a private student loan, for example, consider that there are many reputable lenders without cosigner requirements.
| Private student loan company | Stated eligibility criteria | Also note that ... |
|---|---|---|
| Ascent | Two years of credit history, $24,000 minimum income | If you don't meet those requirements, you could still qualify for an Ascent income-share agreement-like loan. |
| Citizens Bank | Good credit, no prior student loan default | Noncitizens and non-permanent residents have to find a cosigner. |
| College Ave | Credit score of 660 or above | If you're unsure if you can qualify on your own, try the lender's prequalification tool. |
| Earnest | Credit score of at least 650, annual income of $35,000-plus and three years of credit history | Noncitizen students without permanent resident status (who have a Social Security number) are eligible with a cosigner. |
| Education Loan Finance | Credit score of at least 680, annual income of $35,000-plus and three years of credit history | Minimum loan amount of $10,000 |
| Funding University | GPA and school graduate rates vary by your year in the degree program | Your academic success, job experience and projected postgraduate income determine the fate of your loan application. |
| MPower Financing | Attend a degree program in the U.S. or Canada and be within two years of graduation | Your future earning potential, not your credit score, is used to determine your eligibility. |
| PNC | "Satisfactory” credit, meet unspecified debt-to-income criteria | Students must be citizens or permanent residents living in the U.S. for at least two years, enrolled at least half time; cosigner required for 17-year-olds. |
| Prodigy Finance | Attend an eligible graduate school in an eligible state | International students and American students studying abroad are eligible to borrow. |
| SoFi | Good credit | Half-time enrollment is required for all SoFi loans. |
If you have the opportunity to apply without a cosigner and get the same interest rates, take it. It’s better to build your credit on your own without anyone else being responsible for your debt. If you need a cosigner, remember that you’re still the primary borrower who’s first accountable for the loan.
If you can’t make a payment or you’re running late, talk to your issuer about your options as soon as possible. Missing payments can hurt your credit report for up to seven years. Both you and your cosigner will be impacted by missed or late payments, so avoid them at all costs.