When it comes to getting private loans to fund your way through college many students run into problems because they have little or no credit history on which a lender can base his decision to grant a loan. Sometimes a student may have bad, or a poor credit history because they have run into problems meeting financial obligations such as credit card repayments or a car loan. In these circumstances, a student may be asked to get a second party with a good credit record to guarantee the repayment of the loan. This second party is known as a cosigner.

In our society, most students will turn to a parent to act as cosigner, although it does not have to be a parent. The lender will then look at the parent's credit score and credit history, including such things as their repayment history and current income to debt ratio, in deciding whether or not to grant the loan. In cases where a parent has a good credit history, a loan will usually be granted on normal terms. However, when the cosigner's credit history contains items of concern, the loan may either be denied or granted with a higher than normal rate of interest to balance the increased risk being taken by the lender. This difference in interest rates can often appear small, but,over the life of say a ten year loan, this can add up to a substantial sum.

For example, the interest payable on a cosigner loan with a low interest rate of 6% can be twice that of the same loan at 4% over a ten year period. This seemingly small difference of just 2% can result in an additional repayment for many students of $5,000 or more on a single year's loan funding.

The most important thing for any student to look at when borrowing money, whether with or without a cosigner, is the interest payable on the sum borrowed. Interest rates on most student loans varies from about 5% to 7%, and it is not uncommon for students to borrow as much as $100,000 to finance an undergraduate education. This means that once out of college and repaying all of your combined loans, you could easily end up paying nearly $600 a month in interest payments alone.

So, even if you can get student loans with no cosigner, you might well find that a lender will offer you a lower interest rate if you use a cosigner with a good credit rating. Even if the difference is as little as one percent, or even one half of a percent, this can mean a savings over the life of the loan of thousands of dollars.

This free article and many more available for your use by Terry Davis at http://needextracashideas.com