cosigner

There are advantages to signing up for a student loan with a cosigner. But before you get into that first you need to be sure you have exhausted all other avenues such as scholarships, grants and federal student loans before you start to consider a private student loan. Do you absolutely need a cosigner? No, you don’t. If you have a good credit history and score, you can qualify easily for a student loan without a cosigner. Now remember private lending institutions would want to be sure that you are infact credit worthy. What is credit worthiness then? Simply put if you have a minimum of 2 years of continous employment with proof of income such as pay stubs from your employer to show for then you are deemed credit worthy. This along with a good credit score and you will find that private lending institutions and banks will be more than happy to fund your student loan.

On the other hand if you don’t, then maybe looking for a cosigner for your private loan might not be such a bad idea.

Here are the benefits of taking out a student loan with a cosigner.

• Firstly your chances of approval is greatly increased
• Next, you get the benefit of your cosigner’s credit score and history to negotiate and receive better terms on your loan.
• The rate of interest and period of your student loan is directly related to the risk associated with your loan. The better your cosigner’s credit the better are your rates.
• With a good co-signer you might be able to negotiate on the fees and incidental charges that are usually added when taking out a loan.
• Unlike other loans, the chances of your loan being disapproved because a parent or co-signer has enough funds is nil.

Now remember to choose your co-signer wisely. Most students have their parents act as co-signers. However, a co-signer need not be a relative. Anybody can act as a co-signer provided they meet the eligibility requirements. Any adult that meets credit and citizenship requirements can act as a co-signer for your student loan.

What Is The Co-Signers Responsibility?

An adult when he or she agrees to be a co-signer is basically assuming equal responsibility towards repayment of your student loan. The loan becomes part of the co-signers credit history as well.

What Does The Co-Signer Need To Apply?

The following information or documents are usually collected from a Co-Signer during the loan application process

• Current Address and Contact Information
• Social Security Number
• Employment related details such as Company name, address, phone number, gross salary, pay stubs etc
• Rent or Mortgage Payment Details

When Can I Remove A Co-Signer From My Loan?

When you have made 24 consecutive monthly payments towards your student loan on time and meets certain credit requirements you can then remove a co-signer from your loan.

Whether you need a co-signer or not is really dependent on the individual’s situation. If you have the following then you probably don’t.

• Established and positive credit score and history
• A decent debt to income ratio
• A minimum income of $12,000

If you don’t meet the above or if you are not getting good terms on your loan then you probably need a co-signer for your student loan

One of the biggest issues that students face when entering college even with financial grants or aid is apart from room and board is transportation. If you have to commute fairly long distances then this problem is even more aggravated. Many students in such situations start to wonder if they can use their student loan funds towards buying a car. Now the short answer to the questions is yes, you can buy a car with your student loan or financial aid but there are a few conditions that you have to first meet.

Remember the main reason the government or a private lender gives you money in the form of a student loan or grant is for your educational needs. The expectation is that you will be using these funds to further your education. Therefore most of your loan money must be used for your tuition and other college related expenses. If you have any left over money from your grant or loan then you have the option to consider how to best use this money.

Again, let me be clear, you cannot use these funds in any other manner but for your education. Now a car can be considered a legitimate expense if it is for the purpose of commuting to your school. Buying a car, buying a laptop and other school related supplies can be valid reasons for your left over funds. The crucial point to note here is “left over funds from your student loan“. The main usage of your student loan must be for your tuition. Infact in most cases your federal loan or grant money is handed over to your college. The college or university once they deduct all your expenses will hand over any left over or remaining funds from your student loan back to you and this again as explained above is expected to be used on expenses that are directly related and for furthering your education.

I hope this answers your question regarding using your student loan money to buy a car. We’ve had many questions around this subject and infact have another article that talks about the same question. As usual I’m listing a few questions we get around this subject.

• “Can I buy a cheap and used car using my student loans“
• “Can I use my pell grant to buy a car”
• “I will be starting college this fall. I really need a car. There are ways for me to get to school other than my own car but they are not practical on an everyday basis. My financial aid is paying for my tuition completely. I was wondering if i could use my student loan to cover the costs of getting a car”