A direct payday loan lender will not require any type of signature from a co-signer, but a bank or credit union might. A co-signer is one way a financial institution has to guarantee a loan repayment.
What is a co-signer?
A co-signer is someone to sign on a loan as a guarantor for another’s bank loan to be paid off. If the primary borrower is not able to follow through with payments, the co-signer will be asked to make the payments. In order to be a co-signer, one must have a good credit history themselves. The bank and credit union will do a credit history check on the co-signer in order to qualify them for that position on the loan. Co-signing on a loan is promising to take responsibility for the loan if the borrower fails to do so.
A person who does not have the best credit or has not had the opportunity to build credit will have more luck obtaining a loan with a co-signer. Secured loans will still need this other person signing without having good credit history. Having a loan with collateral and a co-signer is an opportunity for someone to build credit.
Maybe the borrower is starting their first job and fresh out of college. It may not be a situation about bad history, but more like no history or the applicant already has a high amount of debt. Credit cards for college students are readily obtainable and student loan debt weighs heavily on a person. Need a loan to get a car may put you in the position of using a cosigner.
What if the loan applicant is recovery from a bad situation? Many people go through divorces, bankruptcy, loss of job, or medical bills which ruin credit scores. It takes work to get credit rebuilt and many years will go by before a bank or credit union will provide a loan. A co-signer could be a great stepping stone to get over that financial hump.
As someone who is asked to co-sign, the decision should not be taken lightly. As soon as you sign your name, you must be willing and ready to take on the responsibility of that loan. the lender has good reason not to trust the applicant to give them a loan based on their history. These financial institutions have experience with looking through qualification information and basing loan decisions on it. It should concern you as a co-signer if the reason for the need for your signature is based on credit history. Maybe you understand the person’s credibility a bit more. There is reason for thought.
- How much do you know about their history with money?
- Do they have a secure job?
- How stressed is their budget?
- How will your finances be affected if you have to pay for the loan?
- What would your relationship with this person be like if you ended up paying off the loan?
A direct payday loan lender will not ask for a co-signer.
People with bad credit have a much harder time getting help with their finances. Those who are looking to build credit may find getting a co-signer a bit easier. Payday loans, pawn shops and title loan lenders all make high risk loans without the use of a co-signer. The latter two are secured loans and will use the collateral to repay the loan if not paid back. A direct payday loan lender does not use collateral to secure the loan. Your word by way of signature is the guarantee that the loan will be repaid.