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The Bank Says I Need a Cosigner

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Question: I’m applying for a loan but my credit is not great. The bank tells me I need a cosigner. What do I do?

Answer: There are two ways you can approach this: find a cosigner, or work on getting a loan on your own -- without any cosigner.

If you need a cosigner, it means the bank is not confident that you can repay as agreed. Cosigners apply for the loan with you, and they promise to repay the loan if you’re unwilling or unable to. The lender needs a cosigner with good credit and adequate income to apply with you. If you can’t find a cosigner that meets their needs, you’ll have to go it alone.

The best places to look when you need a cosigner are family and friends. Is anybody willing to help you qualify for the loan? In addition to being nice, you’ll need a cosigner on solid financial ground. As you consider potential cosigners, remember that they’ll become responsible for your loan if something happens to you. The bank can make them repay your debt, so you need a cosigner who can handle that risk and who understands it.

Don’t be surprised if you have a hard time finding a cosigner. They take on 100% of the risk for your loan and not everybody can afford to take that risk. They may like you and believe you can repay, but they can’t predict the future -- and any number of surprises can take away your ability to repay.

Go it Alone

If you can’t find the cosigner you need, you may not be helpless. Work on building credit, and search for ways to qualify for a loan. You might have luck with student loans, collateral loans, or peer to peer loans. In fact, these options may be better than using a cosigner in some situations.

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