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.

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

There are several situations where having a cosigner can be advantageous:

  1. Low Credit Score or Income: If your credit score is low, or you have limited credit history, a cosigner can enhance your chances of getting approved for a loan or credit card.
  2. Short Credit or Employment History: Lenders often require a minimum credit or employment history to assess your creditworthiness. Having a cosigner can compensate for your limited history.
  3. Debt or Repayment Issues: A cosigner can help if you have a checkered history of repaying debt or if your credit report shows multiple outstanding balances.
  4. Residency Status: Certain loan types, such as private student loans, may require a cosigner if you don’t meet specific income or credit criteria.
  5. Buying a Home or Renting: If you’re in the market for a home or renting an apartment, a cosigner might be necessary to meet the financial requirements.

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.

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

  • 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

Cosigner’s Responsibility

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 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.

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