One of the most effective ways to lower your student loan interest rate is by refinancing. If your credit isn’t high enough to get approved on your own or you’d like to score the best rate possible, getting a cosigner might be in order. Read on to learn how to refinance student loans with a cosigner.
Benefits of a cosigner
Student loan refinancing criteria is different from lender to lender. You might find that your income or credit don’t qualify for refinancing without help from a cosigner. A cosigner is typically a family member or spouse with good credit who agrees to “co-sign” your loan.
The advantage of using a cosigner is their strong credit can unlock the doors of approval on your application or get you the best rate possible on your loan.
Once your refinancing loan is approved with your cosigner, you’re both essentially co-borrowers and are responsible for the loan. Although you may be the point person for making payments as the primary borrower, the lender will go to your cosigner if you miss a payment.
The benefits of a cosigner mainly serve the primary borrower. Having a cosigner is a legal and financial responsibility for both parties involved that should be considered carefully.
Companies that offer refinance student loans with a cosigner
Once you’ve chosen a cosigner and you both understand the responsibilities and liabilities involved, it’s time to choose a company to refinance through.
CommonBond, a student loan refinancing company, allows borrowers to add a cosigner. You may not need a cosigner if your income and credit are in good shape. But a cosigner can boost your odds of approval if you’re not entirely confident about where you stand.
If you want to refinance student loans with a cosigner, CommonBond can be a good option as they have a “cosigner release” option after you’ve made payments for two years. Cosigner release relieves your cosigner from any financial or legal responsibility on your loan after you’ve made on-time payments for a period of time and are in good standing.
This is ideal for you and your cosigner because your prospective cosigner might be more willing to help you out if the risk is temporary. Again, this means you have to stay on top of your payments until you’re eligible for cosigner release.
Another company that offers refinanced student loans with a cosigner is SoFi. SoFi allows a cosigner on refinance loans, but it’s a process:
- As the primary borrower, you’d first apply and have your application reviewed.
- To include a cosigner, log into your account and input their information.
- An invitation is sent to your cosigner, and they need to consent to the process.
- Your cosigner provides any supporting documentation for the application.
- The refinance student loan application with a cosigner is reviewed again.
Although SoFi allows you to refinance student loans with a cosigner, it does not offer cosigner release. According to SoFi’s FAQs, “The cosigner can only be removed if they pass away, or if you chose to refinance your SoFi loan and qualify on your own.”
That’s something to consider carefully, as your cosigner will be legally attached to the loan until it’s fully paid.
Laurel Road also allows you to refinance student loans with a cosigner. During the application process, your cosigner will get an email to add their information and supporting documents. Depending on your situation, Laurel Road may offer cosigner release on a case-by-case basis. It’s best to contact them directly to learn more about their policy.
Not all companies accept cosigners for student loan refinancing. For example, as of March 2019, Earnest’s Help Center states that it’s working on this feature, but it’s not an option right now.
If you’re looking for student loan consolidation with a cosigner, check out the companies listed above that allow it and review their cosigner release policy. Discuss these options with your cosigner to make sure you understand what you’re getting into. Be sure you both feel comfortable moving forward.
Cons: when having a cosigner gets tricky
Having a cosigner is a perk for you as the primary borrower. But if you stop making payments or even make a late payment, it could affect your cosigner’s credit. This could make the relationship between you and your cosigner difficult.
Some borrowers choose to have their spouses act as a cosigner. But if you get divorced with student loans, your ex is still on the hook for the loan. That’s why you want to think very carefully about having a spouse as a cosigner. Depending on your family situation, it could be better to get a family member — such as a parent or grandparent — as a cosigner.
Even then, student loan consolidation with a cosigner can be serious business. It can lead to messy situations if each party doesn’t uphold their obligation or if there’s a change in the relationship, such as a divorce or falling out.
If you want to refinance student loans with a cosigner, choose the right person to help you and work with a student loan refinancing company that can support your goals.
Have any questions? Get in touch about a student loan plan.