As college students prepare to head off to college, you may be making plans to help them pay for it. We are stretching your dollar with three questions you should ask yourself before co-signing.
Paying for college can be stressful, but being the cosigner for those costly loans, well that’s when it gets really scary.
Money.com out with three things to consider before cosigning.
First – ask whether you can both handle the shared responsibility? While you may not be the primary borrower, it may become your responsibility if something happens to the student financially. You want to consider if you truly can handle paying the full loan.
Second, ask how it will affect your credit and borrowing power. Just applying for the loan may be a hard inquiry on your credit history –
It could affect your payment history if you take over the loan and the student wasn’t paying on time before you. Co-signing the loan will also increase your debt-to-income ratio, which directly impacts your credit score.
Lastly, will you be able to get out of the agreement? Releasing a co-signer from a private student loan can be an uphill battle. You should prepare for that
Bottom line, before you commit to being a co-signer, think about your own long-term plans. If you’re planning to retire or refinance your home, make sure you stay ahead on whatever else you need to pay off to ensure co-signing a school loan doesn’t slow those life goals.