In addition to what others said -- it gives the ability of someone with no financial history the ability to get a loan. I would be very fortunate, my parents are both capable and willing to cosign a loan with me -- but there are a lot of people not in that position. This is another way of "evening the playing field" a bit. Otherwise unless your parents or someone related to you had good financial standing and were willing to cosign for your loan you'd have no shot at getting one.