3 Reasons Cosigning Your Kid’s Loan is a Good Idea

It’s only a matter of time before your kid needs his first loan. You would want to make sure your kid chooses the right one. That’s why cosigning your kid’s first loan is a good thing. Here are a few advantages.

You can guide your kid through the process

You don’t want anyone to take advantage of your kid. Cosigning a loan will make it easier for you to walk him through the process.

A recent report by the Daily Herald states that younger homebuyers are having a hard time with the down payment. Around 53% in the youngest group—those 37 years old and younger—says student loan debt is to blame.

The same report goes on to say that their families ended up pitching to help. 23% of those who belonged to the youngest group took loans from family.

That’s why being there for your kid’s first loan is important. There are a lot of things kids aren’t aware of when they apply for loans for the first time.

For one thing, 52% of borrowers don’t think interest accrue while they’re in college. And about 1 out of 10 of those surveyed thinks they don’t need to repay loans if they fail to find work after college.

But if you are there to cosign the loan, you can guide your kids towards the right path. You’re able to clear up any misconception they may have. You’re in a better position to guide your kid. Together, you can speak with school counselors to get a better idea about the student loan borrowing process.

You and your kid can get a better credit score

Your kid may not have a great credit score at this time. And that’s likely the reason why he won’t get a favorable rate. But with you cosigning, the chances of getting a favorable deal is increased exponentially.

And as Auto Credit Express points out, your credit rating also goes up if your kid is able to make payments without running into issues. This is based on the FICO credit scoring model where a consumer’s credit mix accounts for 10% of your credit score.

You help your kid qualify for student loan

Cosigning a student loan is a big responsibility for any parent. But it has its own rewards.

The main issue you’re addressing by cosigning a student loan is getting your kid approved. There’s a chance your kid is unqualified for student loans. And if he is planning on going to medical school or taking up expensive courses, there’s a chance that federal loans would not cover it. That means finding a private lender.

If you’re a creditworthy individual, cosigning not only improves his chances of getting approved, your kid may even qualify for a lower interest rate. Together you can shop around for favorable student loan deals through online sites.

You can stay on top of your kid’s payments since you’re both responsible for making payments on time. And if your kid falls on rough times, you can pay on his behalf so both of you don’t incur late fees and other fees that bring up the overall loan cost.

As a cosigner, you can also prevent student loan defaults. This happens when the student does not pay his loan for three consecutive months. Going on default will impact your kid’s life in many annoying ways.

They will be reported to major credit bureaus which will cause your kid to have a bad credit rating. It would also affect their ability to secure loans in the future — mortgages, car loans, or any personal loan. If the lender seeks legal action, it can result in seized assets and a toll on his wages.

On the flipside, cosigning a loan helps your kid build up his credit history provided payments are made on time.

Final thoughts

Cosigning a loan has its advantages. But you should also do some research and fully understand what you’re getting yourself into. A recent study found that 31% of parent cosigners saying their chances of qualifying for a mortgage or auto loan went down.

But that is also why you have to be proactively monitoring your kid’s financial situation if you’re applying for a loan together. Just as there are perils, there are also rewards in cosigning with your kid to take out a loan.


Married for eons, mom of 10, Nonnie to 26 with a great grand coming soon, to add to the mix. Avid reader and photo taker, scrapbook queen and jewelry maker. Collector of dishes, planners and pens. Lover of animals, chocolate and spends…long hours soaking in the spa tub (with a fully charged tablet, diet soda, and grub). She’s worn lots of hats, tossed most to the wind, and doesn’t mind starting all over again. Every day is a new adventure…come along for the ride!

Libby has 4361 posts and counting. See all posts by Libby

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