Private Student loans are common in today’s society. After all, pursuing an aviation career requires funds! And sometimes, people need a little help from the government or private banks to get started on the path to success. However, since students don’t have enough credit history to get signed on their own private student loans, they’ll need cosigners!
What are cosigners? Cosigners are basically the people supporting the borrower when it comes to paying back their loans. They take full responsibility for paying back a loan, along with the primary borrower. More often than not, a cosigner is a close family member of the borrower. They are obligated to pay any missed payments and even the full amount of the loan if the borrower doesn’t pay.
It’s a huge responsibility so here are a few things you should know before you become a cosigner:
1.Cosigners are needed for private student loans.
When it comes to cosigning private student loans, cosigners are only needed for private ones. The ones that are sponsored by a financial institution such as a bank or a credit union. As such, the lenders from these institutions will check out a borrower’s credit history, along with other factors. Once approved, they’ll lend the money.
2.The borrower’s credit history determines the level of risk for the student loan.
The student will be the primary borrower for the student loan. However, since they haven’t built up their credit history yet, the lender will check out the cosigner’s credit history as well. This will include the credit report, credit score, and other factors. Before cosigning a loan, it’s important to make timely payments and not have an outstanding debt.
3. Cosigners don’t necessarily have to be related to the borrower.
People assume that family members need to be the cosigner for your student loan. This isn’t always the case. Anybody can be a cosigner to a student, as long as they’re creditworthy and understand/accept their responsibilities as a cosigner. Please note that only one person can cosign for a private student loan.
4. The student receives benefits for cosigning a loan with you!
If you’re willing to cosign a student loan with someone, it means you value their education or career. Not only are you helping them in receiving financial aid but you will also be helping them establish and build credit under their own name. They’ll have better chances of getting approved should they want to get a car, a credit card, or a mortgage in the long run.
5. It doesn’t have to be a lifelong responsibility.
Rest assured being a cosigner doesn’t necessarily have to be a lifelong responsibility. There are private lenders out there that will allow the primary borrower to release their cosigners after a certain period of time. However, certain requirements need to be met from the primary borrower’s end, such as making 12 on-time principal and interest repayments or passing a credit review.
At the end of the day, being a cosigner is a huge help to your student! If you want them to succeed later in life, then financially helping them is the way to go!