But he says that co-signing can benefit students in ways that borrowing on your own can’t, such as helping them build credit. Also, because a co-signed loan has two applicants, you may get a better interest rate. However, lender underwriting policies differ. For example, Allen initially got a much higher rate on a co-signed loan than he expected. The lender told him that was because it combined his credit score with his daughter’s. “I didn’t understand that,” Allen says. “I thought if I’m co-signing and bringing good credit to the equation it should be a better rate.” He applied with a different lender and got what he called a “much better” rate. Allen plans to take out that loan once his family can no longer fund the education on their own.
Ryan Lane is a writer at NerdWallet.
The article Don’t Skip These Steps When Borrowing Parent Student Loans originally appeared on NerdWallet on November 3, 2020.
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