How to find a private student loan cosigner

Having a cosigner could help you secure lower student loan interest rates. (iStock)

Private student loans can help with paying college costs. But unlike federal student loans, they require a check of your credit history before you can be approved.

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If you're still in the early stages of building your credit score, have poor credit or a thin credit file, getting in the good graces of lenders might be difficult. That's where a private student loan cosigner can help.

What is a cosigner?

Approximately 92 percent of all private student loans are cosigned, according to research from MeasureOne. But what exactly does a cosigner do?

In a nutshell, a cosigner is an adult who agrees to borrow student loans with you. This is often a parent but it can also be a grandparent, sibling, spouse, friend or another relative.

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When you apply for private student loans with a cosigner, their credit information and yours are used to process the loan application. Once you're approved, both you and your cosigner are equally liable for the debt.

Why should I use a cosigner?

Having a private student loan cosigner can yield certain benefits when it's time to borrow.

"Some of the greatest reasons for using a co-signer on a private student loan include having no credit history or wanting to get lower interest rates," said Michael Gerstman, CEO of Gerstman Financial Group in Dallas, Texas.

Private student loan lenders take your credit score and credit history into account when approving you for loans and setting your student loan interest rates. If you have a creditworthy cosigner on board with a strong credit score, that could make it easier to get approved and help you secure lower interest rates on private student loans.

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How do I find a cosigner??

Since cosigners share equal legal responsibility for the loans, convincing someone to sign off can be challenging. But there are things you can do to find your ideal private student loan cosigner match.

Scout out the right people

Gerstman said the first requirement for a student loan cosigner is that they be creditworthy and willing to help. So think about who in your inner circle fits that description.

HOW TO FIND A COSIGNER FOR A LOAN

Your parents may be the first choice but don't count out other relatives or close friends. An aunt or uncle, former teacher or college mentor, for example, could also be possibilities for getting the cosigner help you need.

Acknowledge the risks of cosigning

Cosigning private student loans or any other type of debt is risky for the cosigner because they share the obligation to repay the debt. Even if you agree that you'll take the reins in repaying the loans, their credit score could still suffer if you default. Not to mention, they could be subject to debt collection actions if you don't pay.

If you have someone in mind to cosign, let them know from the start that you're aware of the risks. And consider only applying for loans that offer cosigner release if you think it will seal the deal. A cosigner release allows you to remove a cosigner from your loans after making a set number of payments.

Outline your repayment plans for private student loans

When asking someone to be your private student loan cosigner, it's helpful to show them that you've done your homework. One way to do that is by outlining how you plan to repay your loans and what your time frame is for paying them off.

Getting familiar with the interest rates you might pay and knowing how much you want to borrow can help. You can visit Credible to learn more about private student loan options and get personalized rates from multiple lenders without dinging your credit score.

What should I do if can't find a cosigner?

If you're not able to find a good private student loan cosigner candidate, Gerstman said one option is looking for lenders that don't require cosigners or established credit history. In the meantime, you can work on improving your credit score to make yourself more attractive to lenders.

Opening a credit card or getting a small personal loan in your name can be an easy way to do that. This can help raise your credit score if you're paying your bill on time every month and maintaining a low balance relative to your credit card limit.

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You could also ask a creditworthy adult to add you as an authorized user to one of their credit accounts. Authorized user status can give your credit score a boost if the primary account holder uses their card responsibly.

As you begin to see a difference in your credit scores you can explore private student loan options. It's helpful to use an online resource like Credible to compare fixed and variable rate private loan options from multiple lenders.

You can also use an online student loan calculator to estimate the cost of borrowing once you're ready to apply. 

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