For students who need loans to finance their education, a hurdle they often face is finding a cosigner. A cosigner is a person who signs your loan in addition to you, meaning they are also responsible for repayment if you are unable to fulfill your obligations. Many lenders require a cosigner for borrowers who have limited, nonexistent, or bad credit histories.
One benefit to having a cosigner on your loan is that, if their credit history is better than yours, you could qualify for better terms, like a lower interest rate. The obvious downside to needing a cosigner is that they are also on the hook for your loan. This means that if you have financial problems after school and cannot make monthly payments, your lender will turn to the loan cosigner for repayment.
If you don’t have a good credit history, it can be extremely difficult to find a lender who is willing to loan you money without a cosigner. Below are three providers who offer alternatives to cosigned loans:
- The government. The US Department of Education offers federal student loans to those seeking post-secondary education through the Direct Loan Program. Because these loans do not require a credit check or cosigner, they are an attractive option for students who have little or no credit history. Additionally, these loans often have lower interest rates than those offered by private lenders, and there are several repayment plans available for when you leave school. If you have financial difficulties after college, you might qualify for deferment or reduced monthly payments based on your income.
- Find an investor on Prosper.com. One way to avoid complex loan conditions is to borrow money from an individual rather than a corporation. Prosper.com is a service that helps connect investors with people who need to borrow money. You can post a listing to their marketplace explaining why and how much money you need, and investors then contribute toward your goal. Since you and the investor agree upon how much you’ll repay each month, you can have more control over these loans than with a more traditional lender.
- Credit union student loans. Because credit unions are usually specific to their surrounding community, you might be able to find a better loan at one than you would with a corporate bank. Even though you might not be required to find a cosigner, the loan’s conditions could still depend upon a credit check. These loans might also ask for information regarding your employment status or academic standing.
Both the borrower and the cosigner should carefully review the conditions of a loan before agreeing to its terms. Although having a cosigner can make a loan request more attractive to a lender, it can have unpleasant complications if the borrower has difficulty with repayment. By choosing a loan that does not require a cosigner, students can borrow money they need for school and make sure it does not negatively affect others’ finances.
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