Who Is a Cosigner?
A cosigner is a person who agrees to pay a borrower’s debt if he or she defaults on the loan. The person asked to cosign a loan usually has a good credit score and a lengthy credit history, which greatly improves the primary borrower’s odds of approval.
Cosigners play a valuable role in the lending world, and without cosigners, many people would have difficulty getting first time credit. But despite the usefulness of this provision, cosigners tread in dangerous waters.
Reasons to Cosign a Loan
1. It Helps an Applicant Obtain Financing
When purchasing a new vehicle or attending college, it’s normal for people to take out a loan. Take away the availability of loans, and options are limited.
Credit and loan rejections are a reality for people with poor credit history. But sometimes, creditors and lenders will reconsider an application if there’s a cosigner. Taking a chance and cosigning can give someone the opportunity to obtain reliable transportation, attend school, or move into a safe community.
2. It Helps an Applicant Build Credit
Obtaining credit is needed to build credit, but unfortunately, it’s challenging for people without a credit history to qualify for new accounts. As a cosigner on a loan, you have a hand in helping another person establish or build a better credit score and credit history.