What is a cosigner? A cosigner is someone who, with the primary borrower, accepts responsibility for repaying a debt. However, the cosigner generally does not directly benefit from the debt incurred.
Is a co-borrower or co-applicant the same as a cosigner? Yes. These three terms are often used interchangeably. Whether called a cosigner, co-applicant, or co-borrower, this individual is responsible—along with the primary borrower—for repaying a debt.
When is a cosigner required? A cosigner is generally required when an applicant does not meet the lender's criteria for a loan. Often, the reason is that a borrower has little or no credit history on which the lender can make a credit decision. In other cases, it may be due to the borrower's insufficient income or a poor payment record.
What are the legal obligations for a cosigner? A cosigner's obligations are the same as those of the primary borrower. If the primary borrower does not repay the loan, the cosigner accepts responsibility for repaying.
What important information does a cosigner need to know?
Federal law requires lenders to disclose this notice to cosigners:
"You are being asked to guarantee this debt. Think carefully before you do. If the borrower does not pay the debt, you will have to. Be sure you can afford to pay if you have to, and that you want to accept this responsibility.
You may have to pay up to the full amount of the debt if the borrower does not pay. You may also have to pay late fees or collection costs, which increase this amount.
The lender can collect this debt from you without first trying to collect from the borrower. The creditor can use the same collection methods against you that can be used against the borrower, such as suing you, garnishing your wages, etc. If this debt is ever in default, that fact may become a part of your credit record.
This notice is not the contract that makes you liable for the debt."
Cosigners should also understand that the cosigned obligation counts the same as their own loans on a credit report and is factored into their debt-to-income ratio. This may affect a cosigner's ability to obtain his or her own financing at a later time.
Who should I consider as a cosigner on my private student loan? Anyone with good credit and sufficient income can be a cosigner on your Nellie Mae private student loan. Generally, you should consider a parent, spouse, other relative, or close friend who meets the credit criteria.
You should also consider who would be willing to be a cosigner on your loan. For some students, such as international students whose family members are not U.S. citizens, this can be difficult. An individual who serves as a sponsor of your education may be appropriate to act as a cosigner. In all cases, your cosigner should feel confident in your ability and commitment to repay your own debt.