Student Loan Co-Borrowers
By Rachel Seitz
One step in the student loan application checklist you’ll come to when applying with Climb Credit is the option to add a co-borrower. Before deciding whether it’s best to proceed with one or without one, though, you might find yourself wondering just what exactly it is and what its implications are. So, although it can differ from lender to lender, we’ve outlined what co-signing a Climb loan entails and how we use the co-borrower structure. Before committing, we want you to fully understand what this role means for everyone on our applications.
What is a student loan co-borrower?
First off, we’ll start with the basics: what is a student loan co-borrower? The short of it is that a co-borrower is someone who signs onto a loan with a borrower (the main applicant). And in doing so, they agree to take responsibility for repayment should the borrower become unable to make the payments on their own. Although specific underwriting criteria varies from lender to lender, a co-borrower will generally have to provide documentation showing a stable income and have a strong credit history.
What does this mean?
Now that you know what a co-borrower is, you may be wondering what the presence (or lack) of one means for those on the application. For the student applying for a loan with Climb, it means a better chance of being approved, as only one person on the application needs to qualify in order to receive an approval. If the co-borrower has a stronger credit history than the borrower, that could also get the student a lower interest rate than what they would be offered alone. For the co-borrowers themselves, though, the implications are slightly different. They aren’t simply vouching for the borrower; upon signing the loan, they’re also agreeing to make payments in the event that the borrower can’t. The signing of the loan may affect their credit in and of itself, and any negative activity by the borrower, such as late payments, will also appear on the co-borrower’s credit report. So if you’re co-signing a student loan, it’s important to fully understand what you’re signing and to be sure you’re confident that the borrower will make payments on time.
How does this fit into a Climb application?
And how does all of this fit into the Climb Credit loan application? When a student applies, they’ll find at the bottom of the page a button to click labeled “add co-borrower.” Clicking this button will take them to a page where they can enter the co-borrower’s information. (If they don’t have one, they can click “continue without co-borrower” to skip this page and move onto the next.) Once the initial application is complete, we’ll ask for income documentation before approval. Should at least one person — borrower or co-borrower — qualify, they’ll both be sent an approval package to look over and a few forms to sign and return. Like with any other loan, when a co-borrower signs our forms, they are agreeing to take responsibility for the loan if need be, so it’s important to read all of our terms carefully!
In co-signing a loan, a person could help someone take the necessary steps to getting a quality education and improving their life. But, just as in any signed agreement, they’ll want to fully understand what it is they’re agreeing to do. If a student loan co-borrower understands the loan terms and trusts the borrower to make payments, he or she can be confident in the decision to help support someone’s education.