11.10.09 | The Importance of a Co-Signer
Many students become frustrated when they learn a cosigner is required when completing an application for a private student loan. Some because they’ve been on their own for a while now and don’t feel the need for a “babysitter” while others feel trapped because their co-signer options are severely limited. So why do lenders require a co-signer anyway? It’s simple, they want that warm and fuzzy feeling.
I guess the best comparison I can make is if your brother or sister ask to borrow a $100 bucks from you. That can be a risky proposition, right? Now say Mom or Dad tell you they will guarantee that you’ll get your money back over a certain period of time, say 2 weeks with an additional $10 bucks in interest for fronting the money. Wouldn’t that make you feel more secure? Wouldn’t you lend those dollars with more confidence?  A bank works the same way. A co-signer is the banks safeguard to ensure repayment, but a co-signer can also be your best friend too.
Co-signers often reduce the cost of borrowing. An individual with strong credit history can help you receive better pricing. Obviously the lower the interest rate that gets extended to you the better off you’ll be. You’ll just want to make sure that both you and your co-signer do a credit check before you apply. It always makes sense to review and fix your credit prior to applying for a private student loan to ensure you get the best rate available.
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Unfortumately, until the financial crisis improves, it going to be more difficult to secure a private loan with any lending institutions without a co-signor.
January 4th, 2010 | #