What’s the easiest way to get approved for a private student loan?
The answer is simple. Apply with a cosigner.
Even the most independent of students may need to have a cosigner in order to secure a student loan. That’s because lenders largely determine loan eligibility based on credit history.
Most students have a limited credit history, if they have one at all. That’s why only 6% of students get approved without a cosigner.
Let’s discuss what a cosigner is and what their role is in the student loan process.
How do you get approved for a student loan?
If you’ve already been rejected for a student loan, it’s wise to consider reapplying with a cosigner.
A cosigner can be a parent, guardian, grandparent, relative, or any adult with an established credit history. In fact, SallieMae reports that 30% of applicants for their SmartOption loan apply with cosigners other than a parent.
Cosigners agree to be responsible for the loan if the borrower is unable or unwilling to pay. In the lender’s view, a cosigner is a co-borrower and is fully responsible for the loan if the borrower defaults.
Sounds serious, huh? Well, it is. That’s why it’s extremely important to ensure that you are only taking out loans that you’ll be able to repay. (Use our free NitroScore tool to help crunch these numbers. Be sure to hit “refine my score” to take into account all of your information.)
Does everyone need a cosigner?
Even if you can get a loan without a cosigner, it’s still wise to apply with one.
Banks will base interest rates on the higher credit score, which usually comes from the cosigner.
But even if the cosigner has a lower credit score than you do, a loan is still likely to come with a lower interest rate it there’s a cosigner. That’s because bank will be taking on less risk if there are two borrowers who can potentially repay the loan, instead of just one.
What are the risks of cosigning a student loan?
If you’re going to ask someone to cosign a student loan, it’s important to know what you’re asking for. As we mentioned above, the cosigner takes on a certain amount of risk.
The most obvious risk is that if the borrower defaults, the cosigner will be on the hook for repayment. That’s why it’s so critical to find a loan that makes sense with both yours and the cosigner’s financial situations.
It’s wise to only borrow the amount of money that’s needed for school. Use our NitroScore tool to compare costs at different colleges and to find out how repayment may look relative to potential starting salaries after graduation.
A cosigner’s credit score will also be affected by cosigning a student loan. The loan will show up on the cosigner’s credit report, and the cosigner’s credit rating can go down if the loan goes into default.
Many lenders allow cosigners to be released from loans after borrowers have established their own credit and have made a certain number of on-time payments. This allows cosigners to be completely relieved of their obligations to repay the loan.
What are the easiest student loans to get approved for?
Right now (as of June 2017), several lenders are offering attractive terms for student loans. Students who have excellent credit, or who are applying with qualified cosigners, may be eligible for rates as low as 2.87% APR.