How To Ask Someone To Be Your Cosigner
You may need a cosigner to help you get a loan or an apartment lease. But what does cosigning a loan really mean, and how do you ask someone for help?
November 1, 2021
From time to time, we all need a helping hand. In certain cases, this comes in the form of a cosigner.
If you’re applying for a mortgage, making a major purchase on credit or applying for an apartment lease, you may need someone to cosign. This is especially true if you have less than ideal credit or low income.
But what does cosigning a loan really mean? And what is a cosigner?
Cosigning a loan is a big undertaking, and it can have serious implications for both you and your cosigner. It’s vital that all involved parties understand what they’re getting into.
This article will explain what you need to know about cosigning, and help you find the right person.
What is a cosigner?
A cosigner is a person who agrees to pay back a loan on your behalf if you are unable to.
When you apply for a mortgage or another type of loan, the lender will take into account your credit history and income level. If your income and credit are sufficient to meet the lender’s standards for the loan, then you can be approved on your own.
If your income is insufficient or your credit score is too low, the lender may require you to have a cosigner. The cosigner agrees to take responsibility for paying back the loan and is thereby under the same obligations to repay the loan as you are.
You may have heard the term cosigner in relation to an apartment lease. In that case, if you fail to pay rent, the cosigner must take up the slack and cover your monthly rent.
The benefits of having a cosigner include:
The ability to qualify for a loan or apartment for which you otherwise would not
The possibility of a lower interest rate (APR) on a loan
A financial backup plan in the case of a job loss or unexpected financial emergency
Much of the risk of cosigning a loan falls on the cosigner. This is why it’s important to find the right person — someone who is willing to take on substantial financial risk in order to help you.
If you fail to meet your obligations in paying off the loan, the cosigner must take over the loan payments. And if you default on the loan or payments are made late, the cosigner’s credit may be negatively affected.
At the same time, if you don’t miss payments or default, this could help your cosigner’s credit.
Who would make a good cosigner?
When you ask someone to be your cosigner, you’re asking them to take a big risk. Your cosigner should be someone you trust, who trusts you and is genuinely interested in helping you succeed financially.
A potential cosigner could be a parent, sibling, partner, trusted friend or another family member. The cosigner will need to be in good financial standing — both in income level and creditworthiness.
Does a cosigner have to have good credit?
In general, yes, the cosigner needs to have a good credit score —usually 670 or higher. However, this depends on what type of loan you need and the specific requirements of the lender.
In a case where the applicant has excellent credit but low income, the cosigner’s income level may be more important than their credit score. Again, this will depend on the lender’s requirements.
There is a lot of variability in how lenders approach cosigned applications. It’s a good idea to speak with your lender about the specifics of their cosigner requirements and expectations.
How to get a cosigner
Asking someone to cosign a loan or lease is a big deal — the conversation should not be taken lightly.
First, consider your relationship with the cosigner. If the roles were reversed, would you agree to cosign for them? Trust is vital in this relationship and it must go both ways.
Second, prepare for the conversation. Treat this as if you’re applying for a loan — because you basically are. It’s a good idea to be prepared with what you plan to say.
You can start by explaining your situation and discussing why the cosigner can trust you. The cosigner will want to know that you’ve given this a lot of thought. A few points you could make that might help your case are:
You feel you are fully capable of paying for the loan on your own, but you don’t quite qualify for the bank’s standards
You have a backup plan if something happens where you might not be able to pay, like a job loss
In the event that your cosigner has to cover for your payments, you’ve considered how you will pay them back
You’ve thought about how this might affect your personal relationship with the cosigner
Concerning the last point: You’ll want to discuss this with the potential cosigner, and ensure that the person is willing to take both the financial and social risks of cosigning a loan.
Your relationships are important and you’ll want to be understanding if the individual is not willing to cosign.
If you can’t find a cosigner, the next step might be to improve your own financial standing so you can qualify for the loan on your own.
Paying off credit card debt can play a big part in building creditworthiness. If you have high-interest credit card debt, check out Tally†, the credit card payoff app that can help you create a customized payment plan and maybe even help you save on interest.
†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.