What Is A Cosigner?

What is a cosigner? A cosigner is a person of the age of majority who agrees to pay the borrower's debt if the borrower is unable to. Sometimes when we need a loan our credit history may prevent a lending...

Sometimes when we need a loan our credit history may prevent a lending institution from approving it. Having no credit history can be just as bad as having a bad credit history and a great way to get your credit going is to get a loan. You can't get a loan without a credit history and so you are trapped in a vicious cycle. A great way to break free from the circle of no credit is to obtain a loan with a cosigner.


Just what exactly is a cosigner? "A cosigner is a person of the age of majority who agrees to pay the borrower's debt if the borrower is unable to. The cosigner, or in many times, the co-borrower is equally responsible for the debt," said Anne Reed, a loan expert at Acceptance Mortgage in Sparta, New Jersey.




A cosigner can be anyone with good credit. You can ask a relative or a friend to cosign a loan for you. Usually you need someone who trusts that you will make the payments on time and in full.

"The debt will be reflected on the cosigner's credit report and may negatively impact the person's credit should the debt become delinquent. The cosigner should carefully consider the situation before agreeing to sign for the primary borrower," Reed said. "If the primary borrower cannot pay the debt, the lender will pursue the cosigner just as equally as the primary borrower."

A cosigner will need to provide as much financial information as you do when applying for a loan. The cosigner's credit report will be pulled and he or she may have to provide pay stubs or bank statements. The cosigner will need to sign all promissory notes and will be legally binding to the acquired debt just as you are.

A cosigner can also be required when you are renting an apartment. Landlords may require cosigners when renting to students or minors so that they can be assured of someone taking the responsibility for any damages to their property. Usually a parent or older relative will be the cosigner for an apartment. Even if you are of age, a landlord could require a cosigner if you have bad credit.

If you use a cosigner to purchase a house or a car, not only is the cosigner equally liable for the debt, but he or she is also legally entitled to the ownership of half of the property. If you need to use a cosigner to establish credit, it is a good idea to refinance or transfer the property into a loan in your own name as soon as your credit is improved.

Defaulting on a cosigned loan will not only hurt your credit but the credit of the cosigner, so it is very important to take this type of loan seriously and consider the consequences before either one of you enters into the agreement. A cosigned loan can be a great way to get your credit history going in the right direction.

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