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A cosigner is a guarantor for a loan. The lender may ask for a cosigner if the borrower does not meet the criteria to get the loan on his own. A cosigner is usually a parent or relative of the borrower who agrees to cover any unmet obligations if the borrower cannot pay back their debt.
What is a Cosigner?
In simple terms, a cosigner is a person who agrees to be jointly responsible for the repayment of a loan. This means that if you fail to pay back your student loans on time, your cosigner will still be held accountable for paying off the debt.
The main benefit of having a cosigner is that it can help you get lower interest rates than what’s available when you apply alone (although this may vary depending on your credit score).
A cosigner has no association with the borrower in any way other than being their partner at heart. They don’t have any legal obligations or rights towards each other; they just agree that if one falls behind on payments, then both would suffer equally bad consequences—namely, higher interest rates and penalties from collections agencies if they don’t cooperate with their lender’s requests.
As per Lantern and SoFi advisors, “There are both pros and cons when you refinance a student loan with a cosigner, which is worth reviewing before you decide to share the debt.”
Who can be your cosigner?
If you have a cosigner, he or she will be responsible for making payments on the loan if you do not. The cosigners can be family members, friends, spouses, and even co-workers or colleagues.
A cosigner can be anyone who is willing to help with your student loans. Of course, it is always best that the person helping with paying off your student loan should be fine with themselves, as it would become difficult for them to pay off this debt.
The role of a cosigner in student loan refinancing
In the case of student loan refinancing, the cosigner’s role is to take responsibility for the student loan. The cosigner will be responsible for paying off the debt in place of the borrower.
If you are a cosigner, you must be extra careful about the repayment schedule and interest rates of your child’s loan because if they fail to make payments on time, it will also affect your credit score. It may also lead to collection calls and legal actions taken against them by lenders.
How to remove the cosigner from the refinanced student loan?
Depending on your situation, you might need to remove the cosigner from your student loan.
- If you want to be released from your obligation to pay back the loan: You can ask for a cosigner release form from your lender. The lender will send this form to both you and your cosigner, who must sign it in order for you to be completely released from liability.
- If you’re no longer able to make payments: If you don’t think that you’ll ever be able to repay the debt due to personal circumstances such as job loss or illness, then talk with both your lender and cosigner about being given permission not only just temporarily suspend payments but permanently cancel them altogether.
A cosigner is a person who agrees to pay your loan if you don’t pay. If you can get a cosigner, it can be a great way to lower your interest rate and get better terms on refinancing.