Private consolidation loans are similar in many ways to private student loans. If the primary borrower does not satisfy credit criteria, a cosigner may be required. Recent college graduates may not have long enough of a credit history to qualify without a cosigner. Even if the borrower can qualify for a private consolidation loan without a cosigner, adding a cosigner may yield a lower interest rate.
But cosigners should be aware that a cosigner is a co-borrower, equally obligated to repay the debt. If the primary borrower defaults on the loans, it will damage the credit of the cosigner, not just the primary borrower. If the cosigner seeks to refinance his or her mortgage, the mortgage lender will treat the cosigned loan as though it were borrowed by the cosigner. This might affect approval of the mortgage refinance and could lead to a higher interest rate on the refinanced debt.
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