Some Spark Finance loans can be applied for with a cosigner, and for some loans a cosigner is required. A cosigner is a person who supports your loan application and signs the loan agreement with you (the student). If you cannot repay your loan in the future, your cosigner agrees to make the repayments for you. Your cosigner is usually a parent, guardian, relative or close family friend.
Having a cosigner can be a significant advantage when you apply for a student loan, especially if you don’t yet have a long credit history or a full-time income. Here are some of the key benefits of having a cosigner for your Spark loan:
- Improved chances of loan approval: You may be more likely to be approved if your cosigner has a steady income and a good credit history, because Spark assesses your application and your cosigner’s together. Approval is not guaranteed, and all loans are subject to credit approval.
- Lower interest rates: A cosigner with a steady income and a good credit history may help you access a lower interest rate. Spark personalises each rate, so the rate you are offered depends on both your profiles. A lower rate can reduce the total interest you pay over the loan term.
- Your cosigner is considered when working out your loan amount: When Spark works out how much you can borrow, it considers your cosigner’s profile along with your university and program, your total tuition costs and your own financial profile. Each loan is assessed case by case.
- A chance to apply without your own income: Most students don’t have a full-time job. With a cosigner, you may be able to apply even if you don’t have your own source of income, because your cosigner’s income and credit history are assessed with yours.
All Spark borrowers can repay their loan early at any time without penalty, whether or not they have a cosigner.
Which Spark Loans Need a Cosigner?
A cosigner is required for:
- Australian or New Zealand citizens enrolling in undergraduate study abroad
- International students enrolling in undergraduate or postgraduate study at an Australian or New Zealand university
A cosigner is not required, if you meet the assessment criteria, for:
- Australian or New Zealand citizens enrolling in postgraduate study abroad
- Australian or New Zealand citizens refinancing an existing student loan
Spark also offers tuition loans for international students in Australia or New Zealand without a cosigner. Eligibility criteria apply.
Who Can Be a Cosigner?
Your cosigner must:
- be a citizen of Australia or New Zealand (or, in some cases, a permanent resident)
- be over 21 years old
- have a regular income and at least 3 years of good credit history
- understand and agree to their responsibilities under the loan.
What Your Cosigner Is Agreeing To
It is important to keep in mind that being a cosigner is a serious responsibility and a legal commitment. If you are unable to make payments, your cosigner will need to make them. Before agreeing, your cosigner should understand that:
- they are entering a legal agreement
- if you cannot repay the loan, they will need to make the payments
- the loan will appear on their credit record
- it may affect their ability to borrow in the future
- they will receive updates about the loan, such as statements and reminders.
Spark may share information about the loan with credit reporting bodies. Making every repayment on time helps protect both your credit history and your cosigner’s, while missed repayments can negatively affect your credit reports.
The Australian Government’s Moneysmart website has guidance for anyone asked to back someone else’s loan. It suggests treating the decision as if you were taking out the loan yourself, and reading the loan contract and asking questions before you sign. If you apply for a loan later, you may need to tell that lender about any loans you are backing. Backing a loan for a friend or family member can also strain the relationship if repayments become a problem. Nobody should feel pressured into it; Moneysmart notes that pressure to back a loan may be a sign of financial abuse. If your cosigner is unsure about what they are agreeing to, they should consider getting independent legal advice.
Final Thoughts
Overall, having a cosigner can bring real benefits when you apply for a loan with Spark. These include a better chance of approval, possibly a lower interest rate, and the chance to apply without your own income. However, both you and your cosigner need to understand the responsibilities that come with the loan and consider the risks before making a decision.
FAQ
Is a cosigner the same as a guarantor?
You may see the term “guarantor” used by other lenders, especially for home loans, where a guarantor often offers their own property as security. Spark uses the term “cosigner”. Spark’s student loans are unsecured, so your cosigner isn’t asked to offer their home or other property as security for the loan. Your cosigner’s responsibilities are set out in the Spark loan contract, so both of you should read it carefully before signing.
What documents will my cosigner need?
Your cosigner will usually need a copy of their passport, their most recent 3 months of bank statements, their most recent 2 months of payslips, and proof of any other income. Spark may ask for more documents depending on your circumstances.
