Personal Loans with a Co-signer: Increase Your Chances of Approval

If you take out a loan yourself, you’re solely responsible for repaying it. A co-signer is someone who agrees to pay the debt if you miss one or more payments. Usually, people apply with a co-signer if they’re having trouble qualifying on their own or if they want a better chance of favorable loan terms.

What’s the Difference Between a Co-signer and a Co-borrower?

A co-signer makes payments only if the primary borrower fails to make them. On the other hand, a co-borrower is responsible for paying the debt from the start (along with the other borrower).

Can Having a Co-signer Improve My Chances of Loan Approval?

It might. Because the co-signer promises to pay if you don’t, lenders may be more likely to approve you with a co-signer. While it may help boost your approval odds in some cases, it’s still not a guarantee. 

When Is a Personal Loan With a Co-Signer a Good Idea?

You don’t always need a co-signer, but here are a few instances where having one can help.

Limited or No Credit History

If a bank or other lender can’t assess your creditworthiness, it will hesitate to approve you. If you have a co-signer with a strong credit history, you’re more likely to be approved.

Low Credit Score

If your credit score is low, you may only be offered personal loans with high interest rates — if you’re offered any loans at all. If your co-signer’s score is higher, you might qualify for a better interest rate.

Insufficient Income

Lenders check your income to make sure you can afford to pay back your loan. If you’re denied a loan because your income is too low, a co-signer with a higher income might help you qualify.

Lower Interest Rates

Usually, the stronger your credit profile, the lower your interest rate will be. Even if your credit needs work, you might qualify for a lower rate based on your co-signer’s credit.

Building Credit

Taking out loans and paying them back on time can improve your credit history, but you have to qualify for the loans first. Having a co-signer can make you more likely to qualify for credit-building loans.

Debt Consolidation

If you have high-interest debt across multiple accounts, you’ll likely pay more over time. Consolidating your debt into a personal loan with a co-signer can help you save money and pay off your loan faster.

Who Can Be a Co-Signer For My Personal Loan?

Anyone who is willing to take on the financial responsibility can cosign. However, if you want to increase your chances of approval, your co-signer should have a higher credit score and stronger credit history than you do.

How To Apply For a Personal Loan With a Co-signer

First, you’ll need to research lenders and find which ones offer personal loans with co-signers. Once you choose a lender, you’ll need to apply. Both you and the co-signer will need to provide personal details and financial information. You also will both need to sign. 

Looking for an overview on the different personal loan products you could qualify for? MoneyLion offers a seamless way to help get offers for your funding needs. 

See Offers

What Are the Risks and Considerations for Co-signers?

Co-signing a loan is a serious responsibility, as co-signers take on a lot of risks. Here are a few things potential co-signers should consider before making a decision:

• The loan impacts their debt-to-income ratio and might lower their credit score.

• If you can’t make payments on time, the co-signer is obligated to make them for you — they might end up being on the hook for the whole loan amount.

• If you default on the loan, the co-signer’s credit score is at risk.

If you can’t repay the loan, you might strain the relationship between you and the co-signer. Always think carefully before asking someone to cosign.

Alternatives to Co-signed Personal Loans

Do you lack a qualified co-signer? Don’t worry — personal loans with co-signers can be great, but there are other options out there.

Credit-Builder Loans

These loans are designed specifically for people whose credit scores have some room for improvement. Because your limited credit history or low credit score poses a risk to the lender, you don’t get the whole loan sum upfront. Instead, you’ll pay in installments before you receive some or all of the money.

Secured Personal Loans

These loans require you to put down some type of collateral before you receive the money. That way, if you don’t make payments, the lender can take the collateral. One common example is a title loan — you get a loan based on your car’s value, but if you don’t pay it back, the lender can take possession of your car.

Take Control of Your Financial Future With a Personal Loan

Taking out a loan with a co-signer can be a great way to improve your financial standing. But think carefully before you take one out — if you can’t pay it back, that responsibility falls on the co-signer, putting their credit at risk and straining your relationship. 

A personal loan might be the next step on your financial journey. But you don’t want to settle for just any personal loan option. It can be helpful to get an overview of the different products you could qualify for. 

FAQs

Can I remove the co-signer later on?

Sometimes you can, but the process can be complex. Most lenders require you to refinance if you remove the co-signer. Without a co-signer, you pose a greater risk to the lender, so the lender might impose stricter loan terms or a higher interest rate.

Will the personal loan appear on both the co-signer’s and my credit reports?

Yes, it will — it shows up on the co-signer’s report as if the loan is theirs.

How long does it take to get approved for a personal loan with a co-signer?

That depends on the lender. Some lenders can approve or deny you on the same day (once they have both your information and the co-signer’s). Others take a few days or even longer.