A borrower would get a cosigner for a loan primarily to improve their chances of loan approval, especially if they have low credit scores, limited or no credit history, or insufficient income. A cosigner with a stronger credit profile and higher income provides additional assurance to the lender, which may result in better loan terms such as a lower interest rate, a larger loan amount, or reduced fees. The cosigner agrees to take legal responsibility for the loan if the borrower fails to repay it, although they do not have access to the loan funds themselves. This arrangement helps the borrower qualify for loans they might not otherwise be able to obtain on their own.
In summary, the main reasons a borrower gets a cosigner are:
- To increase the likelihood of loan approval.
- To potentially qualify for lower interest rates or better loan terms.
- To borrow a larger amount than they could individually.
- To compensate for weak credit history or low income.
The cosigner is typically someone with good credit, such as a parent or close family member, who is willing to share legal responsibility for the loan to help the borrower get approved.