One challenge that many borrowers run into when looking to take out or refinance student loans is the need to have a co-signer.
Having a co-signer can make a big difference. A co-signer means an approved application or qualifying for better rates and repayment terms. Most lenders also consider student loans as unsecured debt, making it “risky”. That means that if the borrower defaults, there isn’t much that can be done. Co-signers are often seen as a fairly important piece of the puzzle, especially for young borrowers and recent graduates.
Unfortunately, not all of us are in the position to have a creditworthy co-signer for our student loans. This can be problematic if you’re a young borrower with limited credit history. The lender you’re working with also expects a co-signer for your loans.
But, is there another way?
Luckily, there are ways to refinance your student loans without a co-signer. There are certain things you should look for to figure out when you can proceed without needing a third party.
1. Find a lender with an alternative credit check
In the modern age of student loan borrowing and refinancing, there are a number of lenders that have alternative versions of credit checks.
This is a necessity. Many recent graduates don’t have the credit history to support lending them $20,000 or $30,000 without any kind of collateral or a second signer.
Instead, these types of credit checks will look into things like the student’s degree, their career path and future earning potential, the student’s saving habits, and even their grades in addition to traditional measures of creditworthiness.
All told, this means that many lenders will approve your request for a student loan or to refinance without needing a co-signer at all.
But, where should you look? Credible allows you to check for loan offers from multiple lenders, and according to their site, co-signers are often not required.
2. Keep making payments on your student loans
Because student loans are such a unique type of loan, many lenders will base their credit decisions heavily on the borrower’s student loan repayment history, rather than some other traditional measures of credit.
Once you’ve made a number of payments on your student loans, this can dramatically increase your creditworthiness to the point where you may not need to get a co-signer.
So, even if your credit score doesn’t increase dramatically, you may find that simply continuing to make payments on your student loans will improve your success with other lenders.
3. Improve your credit score
If you’ve tried in the past to get a new loan or refinance and have been asked for a co-signer, don’t give up!
The tried-and-true method of removing the need for a co-signer is simply to work on improving your credit score all around. That can be done in a multitude of ways. It may mean paying off some credit card debt. Or, settling any outstanding disputes that remain on your credit history.
Keep working on building credit over time and your score will increase. That makes it easier for you to get a loan. This will also lower the burden of having some requirements–like a co-signer–with many lenders.
Improving your score can pay off immensely–not just on student loans!