What Does “Co-Signing” a Loan Mean?

When applying for a student loan, many lenders ask students to have a co-signer for co-signing a loan.

A person holding a pen against paper.

What is a co-signer?

A co-signer shares the responsibility with the student to ensure timely repayments. Essentially, if the student who is taking out the loan can not—for whatever reason—repay, it’s up to the co-signer to do it for them.

What does co-signing a loan mean?

Many students who are taking out loans have their parents co-sign. That means the parents are financially responsible for the loan should their child not be able to pay it off after graduation.

Why is a co-signer Necessary?

So why do many loans require a co-signer before it’s approved? Well, primarily because incoming college students usually have little to no credit built up to their name. Credit is basically your fiscal responsibilities and your track record for making repayments on time. Loan lenders want to ensure they’ll be repaid. Thus, they only give loans to those with good credit—those they know will be able to pay it back. Since most incoming college freshmen don’t have a history of credit, loan providers will ask their parent or guardian to co-sign for them.

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