A cosigner can help you be approved for a loan.
Many banks and lending institutions will require a cosigner if the original applicant does not meet the credit requirements for the loan. A cosigner agrees to take on responsibility for the loan if the original signer defaults for any reason. It is a risk to agree to cosign on a loan.
Age Limits Requiring a Cosigner
Banks cannot legally lend money to a minor. Many parents agree to be a cosigner on a child's first car loan when the child is in high school. Additionally, anyone under the age of 21 must have a cosigner to qualify for a credit card. Some private student loan companies also require a parent to cosign the loan for the student to qualify.
Requirements for a Cosigner
Many loans do not have an age limit for a person to qualify to be a cosigner. Generally, you must have established a good credit score and history and have enough income or assets to cover the loan if it goes into default. For this reason, younger people may not qualify as a cosigner because their credit history is no better than the original applicant's. There is no upper limit on when you can no longer qualify as a cosigner.
Dangers of Cosigning a Loan
People need a cosigner because they either have not established credit yet or because they have a poor credit history. Many cosigners end up paying for the loans they cosign for because the people they try to help default on the loan. If you agree to cosign on a loan, any late payments will adversely affect your credit score, and if the borrower defaults or has a repossession, it will show up on your credit score as well. Carefully consider your willingness to act as a cosigner on a loan before you agree.
Alternatives to Getting a Cosigner
If you cannot find someone to cosign a loan for you, look for alternative ways to purchase the item you want. You can purchase a less expensive item or save up and pay with cash. If you want to qualify for a home purchase, work to build your credit by taking out small installment loans. If you have made mistakes in the past, pay off all your bad debts and work on establishing a more positive credit history so you can qualify on your own in the future.
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