Why You Should Consider Releasing A Cosigner
Cosigning a loan is a major undertaking. By agreeing to cosign your loan, the cosigner is in fact agreeing to share responsibility for the loan. This has several implications for the cosigner.
The loan gets listed on their credit history. Even the cosigner’s debt-to-income ratios increase with the monthly loan payments. All of this can impact the cosigner’s ability to get a new line of credit. For example, it may limit their eligibility to get a mortgage, a vehicle loan or a new credit card.
It gets worse if you miss a payment deadline. A late payment will hurt the cosigner’s credit scores as well as yours. What’s more, your cosigner is legally obligated to repay the outstanding debt on notification from the lender.
Despite knowing the risks, the cosigner may have agreed to help you out. In all fairness, you should release a cosigner as soon as you qualify for cosigner release. Yes, that’s right – you can’t just release a cosigner at any time. Lenders will require you to meet certain criteria to qualify for cosigner release.
Requirements For Releasing A Cosigner
A loan approval depends on the cosigner’s creditworthiness. Cosigner release on the other hand depends on the borrower’s creditworthiness. In releasing the cosigner, you are taking on sole responsibility for the loan. Before a lender can sanction this, they’ll want to make sure that you’re capable of repaying the loan on your own.
These are some of the criteria most lenders will require you to meet to qualify for a cosigner release:
Good credit score – Strong credit is a mandatory requirement for any type of loan approval. The same requirement applies to cosigner release.
Proof of consistent income – This demonstrates that you will be able to cover the loan payments on your own.
A degree certificate – You’ll need to submit proof that you completed your degree program and have graduated. Lenders will want to see a copy of your diploma or an official transcript.
At least 12 on-time payments – Most lenders will only approve your cosigner release application if you’ve made at least 12 on-time payments after graduation. This only applies to on-time payments. Payments made after the due date don’t count. Some lenders may require you to have made 24 or even 48 on-time payments to qualify for cosigner release.
How To Release A Cosigner By Refinancing
If you don’t meet the requirements, one way to release a cosigner is by refinancing your student loan. When you refinance you are exchanging your old loan for a new one with completely different terms. If you meet the refinance lender’s criteria on your own merit, your cosigner’s name will be dropped from the new loan. Your old loan will get canceled and the cosigner will be released automatically.
