Can a 17-Year-Old Get a Loan With a Cosigner?

It is common for individuals under the age of 18 to seek financial assistance, particularly for significant life events like purchasing a vehicle or pursuing higher education. While a 17-year-old generally faces legal limitations in entering into binding financial agreements, the involvement of a cosigner can often bridge this gap. This arrangement allows a minor to access necessary funds by leveraging an adult’s financial standing and creditworthiness. Understanding the dynamics of a cosigned loan is important for both the minor and the adult assuming responsibility.

Legal Capacity and Cosigners

In most states, individuals must be at least 18 years old to legally enter into a contract, including loan agreements. This concept is known as “legal capacity” or “age of majority.” Contracts signed by minors are typically voidable, meaning the minor can choose to cancel the agreement, which makes lenders hesitant to offer loans directly to them. Some states, like Alabama and Nebraska, have an age of majority of 19.

A cosigner is an adult who agrees to take equal legal responsibility for a loan alongside the primary borrower. This individual, often a parent or guardian, effectively guarantees repayment if the minor defaults. Lenders view the cosigner as an additional layer of security, significantly reducing their risk.

They are equally liable for the entire loan amount, including any late fees or collection costs. If the primary borrower misses payments, the lender can pursue the cosigner directly for repayment. The loan’s payment history will appear on the cosigner’s credit report, impacting their credit score positively with on-time payments, or negatively with missed payments or default. The cosigner’s creditworthiness, including a strong credit score and stable income, is important for loan approval.

Common Loan Types for Minors with Cosigners

Several types of loans are commonly sought by 17-year-olds with the assistance of a cosigner.

Auto loans are a frequent need for 17-year-olds requiring transportation for work or school. Lenders are more likely to approve an auto loan for a minor if a creditworthy adult cosigns. The cosigner’s financial strength helps secure better interest rates and terms.

Private student loans almost always require a cosigner for a minor or young adult due to their lack of established credit history or sufficient income. These loans are distinct from federal student loans, which often have different eligibility criteria for dependent students. A cosigner provides the necessary financial backing for the student to pursue higher education.

Secured personal loans, while less common for minors, can also be obtained with a cosigner. These loans typically require collateral, such as a savings account or certificate of deposit. The cosigner’s presence can still be beneficial in securing more favorable terms, even with collateral involved.

Information and Preparations for Application

A successful loan application with a cosigner requires thorough preparation and the gathering of specific financial information from both parties. Lenders assess the combined financial picture to determine eligibility and loan terms.

The cosigner’s financial profile is a primary focus for lenders. A good to excellent credit score, generally 670 or higher, is often required for the cosigner to be considered. Lenders also look for stable income and proof of employment from the cosigner, as this demonstrates their ability to repay the loan if needed. The cosigner’s debt-to-income (DTI) ratio is also scrutinized; this ratio compares monthly debt payments to gross monthly income, with lenders typically preferring a DTI below 43% to 50%.

The minor’s information, while not as heavily weighted, is still necessary. Proof of identity, such as a birth certificate or state-issued identification, and a Social Security Number are standard requirements. Any income the minor may have from a part-time job should also be disclosed.

Common required documentation for both the minor and cosigner includes recent pay stubs, tax returns, bank statements, and government-issued identification. Researching specific loan terms like interest rates, repayment periods, and any associated fees is important before applying. It is also advisable to identify lenders that specifically offer cosigned loans to minors, as not all financial institutions do.

The Application and Approval Process

Once all necessary information and documents are prepared, the application and approval process can begin. This stage involves submitting the compiled details to the chosen lender and awaiting their decision.

The application can typically be initiated online, in person at a bank branch, or over the phone. All gathered documents from both the minor and the cosigner must then be submitted, either digitally or physically.

Lenders will perform credit checks on both the minor (if they have a credit file) and, most importantly, the cosigner. These are generally “hard inquiries” which can temporarily impact credit scores. The lender then reviews the application to make a decision. The timeline for approval can vary, but once a decision is reached, it will be communicated, whether it’s an approval, a denial, or a request for additional information.

If approved, both the minor and the cosigner will be required to sign the official loan agreement. This makes the loan legally binding for both parties. Finally, the loan funds are disbursed, typically transferred directly to the borrower’s bank account or, in some cases like student loans, directly to the educational institution.