How To Find a Co-Signer

Getting a bank loan is tough. There's a lot of documentation and procedures to be completed and above all this, you may also need to get a co-signer for your loan. You may need a co-signer if your credit history is affected by past delinquencies or if you are a student with no direct source of income.

A co-signer takes on a big responsibility and a good amount of risk, when he/she co-signs for a loan. The co-signer provides assurance to the financing institution that the borrower will make payments as agreed on his loan and that, the co-signer agrees to take on the responsibility of making repayments in case the borrower defaults on his payment. The co-signer therefore, is jointly and equally responsible for the loan repayments, as the primary borrower.

Considering the above, it is not surprising that finding co-signers is difficult. Where do you look for a co-signer?

A co-signer must:

  • Be somebody you can trust, and
  • Have at least two or more years of credit history.
  • Have a good credit history and no disparaging observations on their credit record.
  • Be responsible and making bill payments of his own on time
  • Be suitably employed or with enough income to meet loan commitments.

Below are some tips that can help when you want to locate a co-signer for your loan:

  • Look amongst family first - There will be family members who know you, your capabilities and your integrity. They will be there to help you with your loan application.
  • Checks with friends - Those close to you after family, are your friends. They will also know about your character and your capacity.
  • If you are employed, ask your superior - Your boss already knows you on the job and your responsibilities, work ethic, etc. His good opinion of you may support a decision to co-sign.
  • If you run your own business, check with your business partner.
  • You could also check with a respected and trusted colleague, as interaction in the workplace will give that colleague, a favorable and strong enough impression to co-sign.

Steps to convince a potential co-signer:

  • 1. Chart a repayment plan for the loan amount, showing how and where the money for repayment will be secured. This will instill confidence in the co-signer.
  • 2. Show a clear justification for your loan - if it is to buy an article, clearly illustrate why you need it, if there is a benefit accruing from it, can the benefit help in the repayment or otherwise.
  • 3. If there is any benefit accruing to the co-signer in any way from the loan, ensure that the co-signer sees it clearly in your explanations.
  • 4. Assure the co-signer that the responsibility on the co-signing is not forever, i.e. some loans release the co-signer form their responsibility when the primary borrower displays sufficient and good credit behavior.
  • 5. You can also draw up a personal contract between you and the co-signer, which will reassure and display to the co-signer your commitment to the loan.
  • 6. Clarify any doubts or questions that the co-signer may have on the repayment plan, on the need for a loan etc.

Once the loan is granted:

  • Inform the co-signer of the approval of the loan and how you have used it for the decided purpose.
  • Keep the co-signer informed of your repayments and be in contact so the co-signer does not get perturbed, that after getting the loan you've disappeared.
  • For loans where the co-signer is released from his/her obligations after the prescribed period and display of credit worthiness by the borrower, personally meet and let the co-signer know. Express your gratitude for this help in your finances.

Taking a loan and ensuring its repayment is a big responsibility. The co-signer makes it easier to get a loan and helps in building your credit history too. Similarly, your credit behavior on this loan will affect your co-signer's credit records. When a person agrees to be your co-signer and takes on additional risk, recognize his/her contribution and willingness. Repay their kindness by ensuring prompt and regular repayments on your loan, thereby enhancing their credit rating as well.


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