Guide to getting a personal loan with a co-signer
Sometimes you need assistance qualifying for a personal loan
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If you don’t meet the minimal requirements for a personal loan on your own, you still have options. Some lenders allow you to add a co-signer to strengthen your loan eligibility. Applying for a personal loan with a co-signer can help you qualify for a loan and secure better rates than you would otherwise have access to.
- Adding a co-signer to your loan application can improve your eligibility and rate.
- You are still responsible for paying your loan on time.
- Being a co-signer is risky because the co-signer’s credit score is on the line if the primary borrower doesn’t repay the loan.
Why you might need a co-signer
Personal loans are considered unsecured loans, or loans that are not tied to collateral. Therefore, lenders have strict credit and income guidelines. You might need a co-signer if you have:
Even if you qualify for a personal loan, having a co-signer with a higher credit score and income may help you lock in a lower interest rate.
- A low credit score
- Low or no income
- No credit history
- Not met age requirements
- Freelance/gig income
- A high debt-to-income (DTI) ratio
Even if you can’t find a co-signer with excellent credit, having two signers rather than one can help increase your approval chances.
Michael, a ConsumerAffairs reviewer from Arizona, was approved for more money than he asked for from a lender “even though my co-signer and I have both had some credit challenges in the past.”
Types of loans you might need a co-signer for
Co-signers can help you increase your loan eligibility for many types of loans. If you have minimal or bad credit history, plan to use a co-signer for the following loans:
- Student loans: Private student loans often require a co-signer to meet minimum eligibility. However, you do not need a co-signer for federal student loans, so it is best to apply as the sole borrower so you can qualify for loan assistance in the future if needed.
- Car loans: Even if you can secure a car loan as the sole applicant, a co-signer can help you get the lowest rate possible. You don’t want to overpay on your car loan because brand-new vehicles depreciate quickly.
- Personal loans: Personal loan rates can be upward of 30% if you have bad credit. A co-signer with excellent credit can keep you on the lower end of the rate range and save you money on your loan.
Difference between a co-borrower and a co-signer
Co-signers and co-borrowers can both increase your chances of qualifying for a loan, but they are not the same thing.
“A co-borrower is used if you want to share the loan — both borrowers would have access to the funds and are responsible for repayment,” said Kendall Clayborne, a certified financial planner at SoFi. Co-borrowers are common among spouses or when more than one income stream needs to be considered for a larger loan balance, she says.
“A co-signer, however, may be used to help the original borrower qualify or get a better interest rate on their loan,” Clayborne said. A co-signer does not have access to the loan funds but shares the repayment burden. If you don’t repay your loan and the co-signer doesn’t step in, you both are liable to take a credit hit.
How to find a co-signer
A co-signer can be anyone who meets loan eligibility requirements. They can be a spouse, parent, grandparent or other trusted friend or family member. However, you will need their permission to use them as a co-signer, and not everyone is willing to take on the risks of co-signing.
Ideally, your chosen co-signer should have an excellent credit history and a steady source of income. If their credit score is high, you’ll have access to better loan rates.
A warning about using a co-signer
Your co-signer’s credit is attached to your personal loan. If you miss a loan payment, both of your scores will suffer. If you can’t make payments on the loan, the co-signer will be held equally responsible. Endangering your co-signer’s finances can damage your relationship with them.
Pros and cons of using a co-signer
Remember: Your co-signer takes on a risk when they agree to be on your loan. Don’t take it personally if a loved family member or friend does not want to take that financial risk.
If you’re not able to find a co-signer, you might have to take on a higher interest rate or find an alternative way to borrow money.
Consider these pros and cons of using a co-signer before proceeding with a co-signer.
- Easier to qualify: Having two signers makes it more likely you get lender approval.
- Better rate: If your co-signer has a better credit score, you could get a better interest rate.
- Better credit history: If you repay your loan on time, you can improve your credit.
- Credit score risks: A missed payment will hurt both your and your co-signer’s credit.
- Broken relationship: If you don’t repay your loan, you can damage your relationship with your co-signer.
- Co-signer on the hook: If you can’t repay your loan, the co-signer will be responsible.
What to do if you can’t get a co-signer
You still have options if you cannot get a co-signer for a loan.
- Improve your credit score: If poor credit is the reason you can't secure a loan, focus on improving your credit score. Regularly paying bills on time, keeping credit balances low and avoiding new debt can help improve your credit score over time.
- Consider a secured loan: A secured personal loan is a loan backed by collateral, such as a vehicle, savings, property or stocks. As a result, these loans are easier to qualify for.
- Seek nontraditional lending sources: If traditional banks and credit unions won't approve you, consider other sources. Online lenders, peer-to-peer lending platforms, and credit unions often have more flexible lending criteria.
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Is it easier to get approved for a loan with a co-signer?
Yes, getting a personal loan if you have limited credit history or income is easier with a co-signer. A lender will view lending to you as less risky since you and another individual are both responsible for the loan.
What credit score does a co-signer need for a personal loan?
While each lender might have its own minimum score, finding a co-signer with good to excellent credit (a FICO score of 670 and above) is ideal.
Can I get an online loan with a co-signer?
Some online lenders allow co-signers. As you apply with one of these lenders, there should be a space on the application that allows you to input the co-signer's information.
Can I be denied a loan with a co-signer?
Having a co-signer doesn’t guarantee getting approved for a loan. This is why it is important to use a co-signer with good to excellent credit and steady, sufficient income.
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