Do you need a cosigner to qualify for a personal loan, or will a cosigner significantly improve your loan terms? If so, you should consider who might cosign your loan and how you should ask them.
It is important to be prepared for this conversation to show your potential cosigner that you are responsible and capable of repaying the loan. Navient Marketplace is here to help you learn how to ask a cosigner to share this financial responsibility.
Choose Your Cosigner Wisely
A cosigner is agreeing to legal responsibility for your loan and its repayment obligations. Therefore, it is important to choose someone that you trust. Cosigners are typically close friends or a family member.
The cosigner should be financially stable and have a good credit history. A cosigner with excellent credit can increase your chances of being approved and securing favorable loan terms. It will also mean that if you are unable to make your payments for any reason, the cosigner will likely be able to.
It is also important to choose someone you can be open and honest with. If something comes up and you have trouble making payments, it will be important to tell your cosigner right away. Having a cosigner that you have good communication with will make the entire process smoother.
Advantages of Having a Cosigner
There are several advantages to having a cosigner. Loan lenders are more willing to approve the loan application of a borrower with strong credit over an individual with bad credit. They are also more likely to give better repayment terms and lower interest rates based on the cosigner's creditworthiness. Having a cosigner on your loan can be convenient to you as a borrower if you have little credit history or poor credit.
How to Ask Someone to be a Cosigner:
Tell them why you’re taking the loan out
Make it clear to your cosigner why you need the personal loan. Whether you are purchasing a car or consolidating your debt, explain your personal and financial goals. A cosigner is more likely to agree to help you if they understand your reasoning and agree that the loan will be beneficial for you.
Explain how a cosigner can help your application and loan terms
Let your cosigner know the positive impact that cosigning could have. Explain that you will have a greater likelihood of being approved and more favorable loan terms.
This loan is also an opportunity for you to build your credit and prove your creditworthiness. Your cosigner is helping you with more than they may realize.
Make sure they understand their responsibility as a cosigner
Cosigning a loan is a huge responsibility. It is important for you to understand your responsibilities as the primary borrower, and it is equally important for the cosigner to understand their responsibilities as well.
Agreeing to cosign a loan means your cosigner has a legal obligation to the loan repayment. They are jointly accepting responsibility and will be held accountable for any missed or late payments. If the loan defaults or has missed payments, it can hurt both your credit and your cosigner's credit.
Make sure that your cosigner knows what responsibilities come with cosigning on your loan. Share resources that help them understand what cosigning entails and how they can be prepared to assist you as well as protect their own credit.
Discuss your plans to repay the loan
When you are talking with your cosigner, come prepared with a copy of your credit report and information on your income. Share your budgeting strategies and other steps you have taken to ensure you can make monthly payments. This will show your cosigner you are taking this responsibility seriously.
Discuss your specific plan for repaying the loan. Are you going to make the payment every month? Or would your cosigner rather pay it and be repaid to ensure on-time payments? Your repayment plan will vary depending on what you and your cosigner are most comfortable with.
Regardless of how you decide to repay the loan, make sure you and your cosigner have agreed on it before the loan is taken out.
Agree on what you’ll do if you can’t repay the loan
Consider and discuss what will happen in the event you are unable to make a payment. Or, if you will be unable to repay the entire loan.
While no one plans on being unable to make loan payments, you should be prepared just in case. Discussing every possibility will give your cosigner transparency upfront and prevent conflict and misunderstanding.
Things to Remember During Your Conversation:
Be honest and upfront with your cosigner
Cosigning is an enormous responsibility with potential impacts to your cosigner's credit score. They should be aware of all the risks and responsibilities associated with cosigning. Do not hide anything from your cosigner or diminish the role they will have in the loan.
Be honest and upfront about your financial situation and reasons for taking out a personal loan. The individual will be much more likely to cosign if they trust you.
Be willing to negotiate
The cosigner is helping you out by taking on this loan. Be willing to negotiate repayment plans and other details. Cosigning places an equal responsibility on you and your cosigner, so the cosigner deserves input.
If they say yes, show your gratitude
If your cosigner agrees, let them know that you are thankful. Throughout the life of the loan, show the cosigner you are a responsible borrower and follow through on your plan to pay for the loan. This will not only demonstrate your gratitude, but help your credit history as well.
If they say no, accept it gracefully
Although you were hoping they would accept, thank the cosigner for their time. They may have reasons for declining, such as planning to take out a personal loan of their own or the impact it would have on their debt-to-income ratio.
Respect the individual's decision to decline and consider other trusted friends or family who may be willing to help you out.
Apply for a Personal Loan with a Cosigner
Now that you know all about how to find a cosigner, you can take out your personal loan! Apply for a personal loan with Navient Marketplace today.