What Makes a Good Cosigner? 5 Important Qualities

A good cosigner for a student loan generally has good to great credit, a steady employment history, and sufficient income. In addition, most lenders will require that they be U.S. citizens or permanent residents.

Depending on the type of student loan you take out, you may or may not need a cosigner. If you find yourself in a position where you need a cosigner, it’s important that you choose the right person. So, what makes a good cosigner, and how to identify the right person to cosign your loan?

There are a few qualities you need to look for to help you make this important decision. But before discussing what makes a good cosigner, it’s important to understand when or why you may need one.

Most student loans will require a cosigner to be approved, but selecting the right cosigner is important

Flickr user Tony Unruh

When Do You Need A Cosigner And Why? 

As a student, you’ll only need a cosigner when applying for private student loans. This is because private lenders approve loan applications based on financial credentials. In most cases, you will need a good credit score and a steady income to qualify for a private student loan. As a student, you may find it difficult to meet these two main requirements. This is where having a credit-worthy cosigner can help. When you apply for a private student loan with a cosigner, the lender will approve based on the cosigner’s financials.

READ MORE >> Do You Need a Co-Signer for Student Loans to Be Approved

You don’t need a cosigner when applying for federal student loans. Under the federal financial aid program, all students are eligible to apply for federal student loans. When you submit the Free Application for Federal Student Aid (FAFSA), the federal government calculates how much financial aid you’re eligible for based on your family’s finances and other factors.

5 Things That Make A Good Cosigner

If you’ve exhausted all your federal financial aid and need more money to fund the gap, you may need to look for a cosigner to help you secure a private student loan. These are the top 5 things that make a good cosigner.

1. The cosigner has Good to excellent credit

This is the most important factor when looking for a cosigner. Most lenders will only approve loans to applicants with a good credit score, typically around 720 or higher. A higher score also qualifies you for a lower interest rate. To get approved easily and score a lower interest rate, look for a cosigner with a high credit score.

Some lenders may approve with a lower credit score but they will almost always charge a higher interest rate. This will increase the cost of the loan significantly.


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2. Steady employment history

Most lenders will require a cosigner to have a stable employment history and be at their current place of employment for over a year at the time of cosigning the loan. This is to ensure that the cosigner will be able to pay back the loan if you default.

Lenders will look favorably at a cosigner who has a long history of working under stable conditions. On the other hand, they may reject your loan application if your cosigner has an erratic employment history.

3. Sufficient income

This ties in with the earlier point. Usually, it’s not enough for your cosigner to be earning a steady income. They should also be earning a high enough income so they can afford to cover their own expenses and also honor your loan payments if you default.

4. U.S. citizenship or permanent residency

To protect their own interests, most lenders only approve loans if both the primary applicant and the cosigner are U.S. citizens or permanent residents. This is because it’s impossible to collect debt from a borrower who isn’t even in the country.

5. Good health:

Considering the health of your potential cosigner is not as mercenary as it sounds. But, some lenders have a policy that forces the borrower to pay the full amount if their cosigner dies. This is even if all previous payments were made on time. This could put you in a tight spot and could even force you to take another expensive loan to pay back your current loan should your cosigner die.

Importance Of Looking For A Good Cosigner

First and foremost, you need a good cosigner to get approved for a private student loan. If your cosigner doesn’t meet the lender’s minimum requirements, your loan application will very likely get rejected.

Very few lenders may compromise and agree to lend you money even if the cosigner falls short of their requirements. But they will almost definitely charge you a higher interest rate in this case.

The second, equally important reason, is to protect your own financial credentials. Once someone cosigns your loan, their financial credibility and yours are linked. If they default on any loan or mortgage payment, it will hurt your credit score.

And if you default on your student loan, it will hurt their credit. When looking for a potential cosigner, make sure you ask someone who is financially responsible, so your credit is not at risk.

READ MORE >> Ways to Help Your Child Build Credit

Where To Start Your Search For A Cosigner

To get a cosigner, you just have to ask someone you trust. Your best bet is getting someone who knows you as well. Consider asking a trusted family member, friend, or business partner. Before you approach anyone, ask yourself, ‘Will they make a good cosigner’? Keep in mind the factors listed above and only ask someone to cosign if they meet all 5 criteria.

Looking for private student loans? Use College Raptor’s Student Loan Finder to discover personalized private loans. Compare lenders and interest rates to find the ideal student loan for you!


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