Many of us have been in a position where asking for help with our finances seemed like the only way to get out of a pinch. And as difficult as it may be to lean on someone else for support, there are times when it’s a necessity.
If the bills are stacking up and you’re running into problems refinancing your student loans, you might be wondering if you’ll ever get out of debt. While it might not feel like it right now, there is a way to get some relief — even if you can’t refinance on your own.
Do you need a cosigner?
First off, let’s define what a cosigner is: a cosigner is another individual who is willing to take responsibility for the loan alongside you. A cosigner is equally responsible for the loan in the event that you are unable to repay it.
Knowing if you need a cosigner is the first step in addressing the problems you may be having with refinancing your student loans.
See also: Quiz: Do You Need a Cosigner to Refinance Your Student Loans?
If your credit score doesn’t meet the lender's minimum requirements, you might want to consider asking someone you know if they would be willing to cosign on a loan with you.
How do you find a cosigner?
Once you’ve identified that you need a cosigner, your next step is to figure out how to find one.
Most lenders will allow a qualifying adult who is willing to share the responsibility of the loan with you be your cosigner.
Make sure you let the person you’re asking know that you have exhausted all of your other resources. It’s also smart to assure them that you are going to be the one making the payment, and they are there only in the case of an emergency.
If you can, show them how much money you make and a detailed plan of how you’re going to make your payments.
Finally, talk with them about being released early from their responsibility if you're able to handle payments on your own for a certain period of time. Most lenders will allow you to release your cosigner after you prove your ability to pay and you've built up a solid credit history.
What are the benefits of having a cosigner?
Having a cosigner can get you a better interest rate even if you have good credit. That's because it allows banks to spread the risk.
If you're unable to make your payments, the bank has someone else they can turn to. Having this assurance makes you a more-attractive borrower to the lender.
Who should you ask?
When you’re in a bind, who do you typically turn to? Is it a parent, a friend, or an extended family member?
If you’re going to ask someone to cosign with you on a loan, you need to make sure they’re the right person for the job.
Parents are the most common cosigners on loans. If your mom or dad is able to help you, start with them. If not, look to extended family members such as grandparents, aunts, uncles, or siblings.
From a lender’s standpoint, a cosigner should have a credit score above 700, a well-established work history, and a steady income.
Before a lender approves a cosigner, they'll want to make sure that if you can’t make your payments, your cosigner will have no problem stepping in.
Who should you avoid asking?
Sharing money decisions with a family member or friends can put a strain on your relationship. That’s why the person you choose needs to be someone you feel comfortable communicating with.
As tempting as it may be to ask your roommate, significant other, or coworker, that could prove to be a bad decision. It's best to find someone with whom you can be assured that you'll have a long-lasting relationship with. Take some time to consider who you’re asking and make sure they’re the right fit.
Curious how much you can save by refinancing your student loan? Check out our Student Loan Refinancing Calculator.