Does having a co-signer guarantee a loan?

by Manshu on October 30, 2008

in Articles

A co-signer is a person who accepts responsibility for paying off the debt in case the primary borrower defaults.  If you do not have sufficient credit history, then you should get a co-signer who has got a better credit history to get the loan you want at better rates and terms.

However it is a misconception that getting a co-signer with a good credit score is a guarantee to getting the loan you want.

When issuing a loan, the creditor has got considerable leeway for judging who can repay the loan and who cannot. Therefore in some cases, even if you manage to get a co-signer who has got a good credit history, you may be refused a loan.

Apart from your credit score, some other factors that the creditors will look for:

  • Your current income and income history
  • The other debts that you have
  • The collateral that you can come up with

Although most of the times, getting a co-signer with a good credit history solves the problem of getting credit, in some circumstances, the creditor may still refuse to issue you the loan.

Also, remember that it does not matter who is the primary borrower on the loan. As far as the creditor is concerned, they can enforce the loan against the primary borrower and if they fail, then the co-signer.

The other question that is often asked is whether co-signing with someone will hurt their chances of getting a loan?

The answer to that is no. Normally, when you go to get a car loan or such, the creditor will tell you whether you are eligible for the loan or not. They will themselves advice you to get a co-signer. That pretty much means that without a co-signer you will not get a loan anyway. So, by getting a co-signer, you are only improving your chances of getting a loan and not hurting them.

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