{"id":1505,"date":"2017-09-29T09:45:46","date_gmt":"2017-09-29T16:45:46","guid":{"rendered":"https:\/\/financer.com\/?page_id=1505"},"modified":"2024-12-10T20:44:12","modified_gmt":"2024-12-11T04:44:12","slug":"cosigning","status":"publish","type":"wiki","link":"https:\/\/financer.com\/loans\/articles\/cosigning\/","title":{"rendered":"Cosigning a Loan"},"content":{"rendered":"\n

What is a Cosigner?<\/h2>\n\n\n\n

A cosigner is a person who officially shares the responsibility of paying a debt\u00a0with a\u00a0borrower<\/strong>. <\/p>\n\n\n\n

A cosigner signs together with the borrower to help them get better terms or to help them get approved for a loan<\/a>. A cosigner may also help the borrower qualify for a higher amount of capital.<\/p>\n\n\n\n

Generally, a cosigner is someone who has a good credit score <\/strong>and can significantly improve the borrower’s chances<\/strong> of the lender approving him or her.<\/p>\n\n\n\n

People who don\u2019t have a lengthy credit history,\u00a0like students or recent high school graduates, may have difficulty getting credit for the first time.<\/p>\n\n\n\n

These borrowers can benefit from a cosigner.<\/p>\n\n\n\n

How Cosigning Works<\/h2>\n\n\n\n

One of the most common examples of cosigning<\/strong> is when a parent signs a rental agreement for their child. <\/p>\n\n\n\n

While this doesn’t involve any borrowing, many first-time tenants find it difficult to get a lease because they don’t have enough credit history or earn enough income to qualify on their own.<\/p>\n\n\n

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Note<\/strong>: In the example above, it is assumed the parent won\u2019t pay the monthly rental charges. However, if the child is unable to pay, the parent is responsible for the payments. If the parent fails to pay, it could <\/span>negatively affect their credit history<\/b>.<\/span><\/p><\/div>\n\n\n

Applying with a Cosigner<\/h3>\n\n\n\n

In a loan application with a cosigner, the lender will require information about both the cosigner and the principal borrower<\/strong>. <\/p>\n\n\n\n

Both individuals will need to provide personal information that will allow the lender to check their creditworthiness. <\/p>\n\n\n\n

The insurance decision and terms for the cosigned loan will be based on the profiles of both the cosigner and the borrower.<\/p>\n\n\n\n

If the loan is approved by the lender, standard procedures will apply. The lender will prepare a loan agreement that will detail the terms of the loan, including the interest rate and monthly repayment schedule. <\/p>\n\n\n

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Both the cosigner and the principal borrower must sign the agreement for the funds to be disbursed. After signing the loan agreement, the main borrower receives capital in a lump sum.<\/p><\/div>\n\n\n

The primary borrower is responsible for making the monthly loan payments. If the borrower is unable to pay, the cosigner’s obligation shall take effect. <\/p>\n\n\n\n

Depending on the terms of the loan<\/strong>, the lender may immediately start reporting arrears for both the borrower and the cosigner to the credit bureaus.<\/p>\n\n\n\n\t\t

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Reasons to Cosign for a Loan<\/h2>\n\n\n\n