Depending on the situation, there are a couple of options available. Getting a cosigner on your student loans can make it possible for you to qualify for a lower interest rate than you would on your own.
Here's what you need to know. Some private student loan companies offer a cosigner release program, that allows you to keep your loans and remove your cosigner.
The requirements to qualify for cosigner release can vary. But in general, you need to make a certain number of consecutive on-time payments, then undergo a credit history review. The process for applying for co-signer release depends on the lender. Develop and improve products. List of Partners vendors. When you cosign any form of loan or line of credit, you become liable for the amount of money borrowed. This may impact your ability to borrow money for yourself because a lender will include the amount of the loan you cosigned on as part of your debt load when calculating your debt-to-income ratio.
Plus, the payment history on the cosigned loan or line of credit is reported on both the borrower's and the cosigner's credit reports. If you've agreed to cosign a loan for a friend or relative, but no longer want the responsibility of shared credit, how do you get your name off the loan?
Fortunately, there are four key ways. With a loan with a larger balance, having the person who's using the money refinance the loan is the best option. This rule applies to most loan types, such as personal loans, car loans, private student loans , and mortgages.
Loans with larger balances are harder to pay off within a few months, so refinancing may allow the borrower to reduce the amount of their monthly payments. The person will also be borrowing a lower amount, assuming that a significant portion of the loan has been repaid, which can mean they will be able to secure the loan without a cosigner. You can also use a version of this strategy with credit cards by transferring balances to a new card under the person's name for whom you cosigned.
Then, both of you can decide to close the current credit card or keep it open, but unused. This strategy, however, works mainly for smaller amounts of money.
Options are pretty slim if the person you cosigned for has a not-so-great or minimal credit history. The five-step strategy outlined below focuses on helping the person improve their credit. This will tell you what their starting point is. Plus, there's an explanation of what factors are causing a lower score.
Once the person you cosigned for improves their score, they may be able to hold the loan on their own. Are there a lot of late pays on loans or credit cards? Does the person have recent run-ins with collections? Are there accounts that should be reported in good standing that show a late payment or went into collections for non-payment?
If yes, these need to be rectified in order to improve the score. The strategy should improve the borrower's ability to obtain credit. It could be as simple as paying all bills on time for six months. This is because a large chunk of a person's credit score is how they manage revolving debt such as credit cards. If the only problem is misreported information, you can resolve these credit report disputes in about two months. Other actions should be given six months in order to make a noticeable impact.
After a few months, check the borrower's credit score again to see if your efforts have made an improvement. As we mentioned, you might begin to see results in as little as a few months, although it might take up to six months to begin to see credit score improvements. If you don't see much improvement, go back to the credit report to see if you've missed any areas that you can rectify to improve the score.
This is especially true if cosigner release is a possibility. The cosigner could pay the minimums for the required time to get released from the loan. Getting a cosigner released from a loan is a big hassle and not always possible. Our favorites offer quick approval and rock-bottom interest rates. Check out our list to find the best loan for you. Christy Bieber is a full-time personal finance and legal writer with more than a decade of experience.
She also ghost writes textbooks, serves as a subject matter expert for online course design, and is a former college instructor.
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