The Responsibilities of Cosigning For a Student Loan

The responsibilities of a cosigner don’t end when the bank approves the student loan application and doles out the money. In truth, the responsibility has only just gotten started.

As a cosigner, your first responsibility will be to counsel the person asking you cosign on their loan and advising them as to the best course of action. Make a gut decision if this amount is the right amount. Too much borrowed could allow for excess spending, and a tough financial burden if the student drops out of school. Too little borrowed, and the student may not be able to complete studies due to a lack of funding. Either way, the student loses. And the cosigner could get stuck with the bill.

Moreover, ask all the “what if” questions: What if you quit school? How will you pay off this loan? What if you move out of state? How will I reach you? What if you worked part-time and only took out a smaller, more affordable student loan to get your through school? What if you sought out loan forgiveness programs available in certain professions like nursing, teaching, and the military?”

In non-legal terms, a cosigner agrees, with the simple stroke of pen adding their name to the college student loan contract, to assume equal responsibility for loan repayment. The cosigner then has assumed a loan obligation which could negatively impact their credit history and lower their credit score.

As a student loan cosigner, you must be responsible to retain copies of all important papers related to the loan, and develop leverage of the borrower to ensure that this loan gets repaid on time.

Entering into a loan agreement means that the cosigner is pledging to pay off the loan if the student
borrower fails to live up to the terms of the loan. If the loan goes into default, the cosigner will be equally liable. And, since a cosigner will probably have more tangible assets, a lender will be able to file a lien on the cosigner’s property to recover on the loan.

So, say if the borrower stops making payments, the cosigner will have to take over the payments. You may even be responsible for the full payment of the loan in the event that the borrower dies or is disabled, though oftentimes a student loan can be forgiven if the right type of loan has been taken out.

Some banks will relieve the cosigner of his or her obligation after the first two years of loan repayments. After the student has made his or her first 24 consecutive monthly payments on time and meets certain credit requirements, he or she often has the opportunity to request to remove the cosigner from the loan.

A cosigner should have a good credit history and steady income, plus full trust in the person he is helping get a loan that he or she will honestly do eveything they can do to repay the loan when the note comes due.

What does a cosigner need to sign on the dotted line and make the loan go through? All lenders require different documentation to approve a student loan. During the application process, cosigners will generally be asked to supply some or all of the following information:

Current address, phone numbers, and alternate contact information
Personal reference information, including full names and phone numbers
Employment information: employers, address, phone numbers, supervisors, time worked at each job, and gross income
Your monthly rent or mortgage payment
Social Security number (some will require you produce the actual Social Security card so they can photocopy it and keep it with the loan application).

When you cosign, your credit history will be examined by the lender. A higher credit score, stable work history and a long-term successful use and repayment of previous credit should help you and the borrower get approved for the loan.

There are two rights that most co-signers should request from the lender. One, demand that the lender give them proper notification of any and all late payments. And, two, writing into the loan agreement a clause limiting the cosigner’s financial responsibility only to the loan’s principle, and excluding late fees and attorney costs. Such rights, properly exercised, could limit the financial liability to the cosigner in the end, should the student loan go into default.

If you are a Sallie Mae cosigner, then there are new protections available. Under the Sallie Mae’s ‘Smart Option Student Loan’, if the primary borrower dies, becomes permanently and totally disabled, whatever balance remains of the loan is forgiven. Thus, the cosigner is not expected to continue making those monthly loan payments. (or permanent and total disability), the remaining balance would be forgiven. However, for other loans such as a Perkins student loan or a Stafford student loan you need to read over the promissory note carefully to see if similar protections apply.

As was stated earlier, the responsibilities of a cosigner don’t end when the application is approved and the loan is funded. The responsibility bestowed on a cosigner after all the money has been spent, the classes taken, and the loan payments begin could last for many years. Thoughtful analysis of all the factors surrounding such a loan request should be carefully considered before one agrees to cosign a college loan.

Used Car Loans – Better Than A Personal Loan

If you have decided it is time to get a new set of wheels, or perhaps your first ever, you are undoubtedly looking into where to turn to obtain the best kind of loan. Most people begin the process by considering getting either personal loans or used car loans for their upcoming purchase. What is the difference, and how do you know which option is right for you? The answers to these questions will be explored here, giving you the information you need to make the best decision.

Before you even have a specific car selected you can apply for your car loan online. Make sure you know the requirements of your loan before you apply. This means that, if you do go ahead and shop around for cars before applying, you need to make sure it will fit within the parameters laid down by the lender. For instance, some car loan companies may require that the car be new enough or have a limited number of miles. There may be restrictions on what kind of vehicle it can be.

Used car loans can only go toward the purchase of your car. On the other hand, personal loans are much more flexible and can be used toward a number of different purchases. The only reason to take out a personal loan instead of a used car loan is if you have another sizable purchase you want to make at the same time without taking out a separate loan. If your only purpose for taking out the loan is to buy a used car, a loan is what you need. While a loan is a loan no matter where you get it from, there are some differences that you should consider if you are still not convinced that your car purchase is best obtained with a used car loan.

Before you even begin receiving used car loan quotes, you should run a credit check on yourself. If this is your first car, you may not have credit built up yet to be approved for a loan. A cosigner will counteract this problem. Ask a parent or other close family member if they would be willing to sign on a loan with you. Be sure you never sign anything, even in a digital format, you do not fully understand. Contact information should be available on websites, so contact the lender with your questions before you sign up.

The biggest difference between one loan and the next is the interest rate. Obviously, the lower the rate, the faster you can pay it off and the less interest you will pay overall. You often have the choice between variable and fixed rates on used car loans. A variable rate may cost you less money if you want to pay off your loan in the shortest amount of time possible. However, if you know it will take you a little longer to pay off your loan, a fixed rate will keep your payments predictable over the entire term length.

The next big difference is secured versus unsecured loans. When you have collateral, such as the car itself, you are participating in a secured loan. These often come with lower interest rates because there is some security. When you take out a personal loan, most often these are unsecured loans, meaning you are likely to pay a higher interest rate for the convenience of not providing collateral. No matter where you take out your used car loans, watch out for hidden fees to avoid any unpleasant surprises.