Knowing the Pros and Cons in Cosigning for a Student Loan

Private student loans are issued based upon credit score. It indicates two things for those trying to get a private loan it is either the credit will be based on the consumers credit score or normally, the better the credit rating, the better the interest rate

Some students benefit by applying for a private loans. The borrower should remember though, if he/she has a cosigner, the cosigner is just in charged for the repayment of the loan. By cosigning your name for a loan, you are guaranteeing that you’ll pay back the loan if the borrower isn’t able to make payments. A lower interest can mean that the borrower can have lower monthly obligations. It can also mean the loan could be paid back more quickly.

In general there are two situations when a cosigner is necessary, even if the debtor has some credit. One of those times is when the borrower does not have an established credit history which ends up in low credit score. Having a co-signer when applying for a private loan for students including a Sallie Mae Signature Loan or a Tuition Answer Loan, may improve your chances of being accepted.

The second situation to use a cosigner could be to acquire a loan with a lower interest rate. The difference in monthly payments on a $10,000 loan can be $50 or more when you compare it in an 8% interest rate and a 12% interest rate. Also the difference in the gathered interest rate could be around $4900 over the life of the loan.

Having a co-signer could be a win-win scenario; however it can also have its drawbacks. Below are a few things to consider before cosigning for a student loan.

1) Be sure if the borrower does omit to repay, that you can have the payments your self.

2) Make sure the person you’re cosigning for is trusted. Cosigning between girlfriends/boyfriends is never an excellent thought. If the romance goes south, the other one could be left holding the bag. Cosigning for a bottom that won’t work or flunks out of school may be a difficult pill to swallow also.

3) In the event you do cosign, be sure you get legal copies of all the records. Bear in mind, those with the most beneficial paper trails win.

4) Get an agreement, in writing and notarized, that the borrowers will payback all the fees incurred which includes the monthly payments, should they fail to repay the credit and you are forced to. You don’t need to wind up years in the future and the debtor tells a Judge that you volunteered to pay back the loan as a gift.

Given that you have these facts, when you co-sign for a loan, make sure you do it correctly! Cosigning for a private student loan has its pros and cons, just ensure that you know who they are before signing on the dotted line.

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