(WTNH) — Decision Day was Monday, and now that students have an idea of where they’re going, it’s time to figure out how you’ll pay for that education. We’re Stretching Your Dollar with what to consider before you co-sign any loans.
Paying for college can be stressful, but being the co-singer for those costly loans — that’s where it gets really scary.
Money.com has three things to consider before co-signing:
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.
Two, ask how it will affect your credit and borrowing power. Just applying for the loan may be a hard inquiry on your credit history, and it could affect your payment history if you take over the loan and the student wasn’t paying on time before you.
Three — ask if you will 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 to be a difficult task.
Bottom line — before you commit to being a co-singer, think about your own long-term plans. If you’re planning to retire or refinance your home, make sure you can balance this new responsibility with your life goals.
Remember: co-signing the loan will also increase your debt-to-income ratio, which directly impacts your credit score.