How To Apply for a Personal Loan With a Co-Signer

Key Takeaways

• A co-signer can help you qualify for a personal loan if you have a low credit score, no credit history or limited income history.

• Adding a co-signer could lower your interest rate and save you thousands of dollars over the life of the loan — for example, dropping from 30% to 24% on a $10,000 loan saves about $2,400.

• Before you apply, comparison shop using soft inquiries that won't affect your credit score, gather income documents for both you and your co-signer and choose a lender with low fees.

Summary generated by AI, verified by MoneyLion editors

If you're in the market for a personal loan but lack the credit history or a high enough credit score to qualify for one, then you might want to consider applying with the help of a co-signer.

Most lenders allow borrowers and cosigners to quickly apply for personal loans online. Follow these steps to find loan options and apply for a personal loan online with a co-signer.

MoneyLion offers a service to help you find personal loan offers. Based on the information you provide, you can get matched with offers for up to $100,000 from our top providers. You can compare rates, terms, and fees from different lenders and choose the best offer for you.

1. Comparison Shop

Most traditional and online lenders will verify your credit with a soft inquiry first. This will allow you to see the rates you can get from different lenders without taking a hit on your credit score.

2. Get Your Documents in Order

To prequalify and find out your rates, you'll likely have to show proof of you and your co-signer's income, like pay stubs and bank statements. Some lenders might ask for documents like previous years' tax returns.

Pre qualification requirements and definitions of income can vary from bank to bank, so make sure you read the requirements closely.

3. Select a Lender and Fill Out an Application

Once you've shopped around for a lender that meets your needs, it's time to make a decision. The best lender will have the lowest rate and doesn't charge a lot of extra fees (application, origination or prepayment fees)

The personal loan approval process varies from a few hours to more than a week depending on the loan terms and lender. Find out how long the process takes with the lender you've selected so that you can plan your budget accordingly.

Why You Might Need a Co-Signer for a Personal Loan

Having a co-signer could help you qualify for a lower interest rate or a higher loan amount, you could potentially save thousands of dollars over the life of the loan.

For example, if you qualify for a personal loan with a 30% interest rate, but using a co-signer gets you in a 24% rate, you could save $2,400 on a four-year, $10,000 loan.

In addition to saving money, here are some other reasons you might want to consider getting a co-signer for your personal loan:

• Your credit score is too low. The first thing a lender looks at when considering your application for a personal loan is your credit score. If you have less-than-stellar credit, you might not be able to qualify for a personal loan.

• You have no credit history. You might not have a bad credit score but instead have a limited credit history or no credit history at all. If you've never taken out a loan — like a student loan or car loan — or you've never used a credit card, then you might not have enough of a credit history for the lender to consider. Getting a co-signer with longer credit history can help you get approved for your personal loan.

• Your income is too new. If you just started a new job or graduated college, you might not have enough income history to qualify for a personal loan. Sure, you're making money now, but sometimes banks want to see a longer history of income before they lend you any money. Your co-signer's income history can potentially help you qualify — just be sure you only borrow as much as you can pay back on your own.

How To Maintain Your Relationship With Your Co-Signer

Agreeing to be a co-signer is a big responsibility. If you miss a payment, the lender will come after your co-signer and they can be on the hook for payments and get negative entries on their credit report. Before you approach your cosigner, ask yourself:

1. What's the Payoff Plan?

Whether you have a co-signer or not, you should always have a plan to payoff the loan. But if you do have a co-signer, it's particularly important to make a plan together, as your ability to pay the loan off affects your co-signer's credit history.

2. Are You Borrowing More Than You Can Afford to Pay Back?

Check your finances to make sure you understand how much you can afford to pay toward your loan each month. Even though having a co-signer can help you qualify for a larger personal loan, you should only accept what you know you can pay back.

3. Can Your Relationship Survive?

Co-signing a loan can affect more than just your credit score — sometimes an entire relationship is at risk. Putting financial issues between two people can alter a relationship forever, for better or worse.

The stress of borrowing money can strain or break a relationship, or the bond and trust involved in repaying a loan can enhance it. Because paying off a personal loan is a multi-year commitment, make sure you and your co-signer have a solid relationship that can stand the test of time and have a history of open communication and honesty.

What To Do If You Can't Get a Cosigner for Your Personal Loan

If you can't get a co-signer for your personal loan, you might still be able to qualify for a lesser unsecured loan amount or a secured loan. In fact, many lenders extend personal loans to people even if they have poor or limited credit histories.

Without a co-signer, you might pay more in interest over the lifetime of the loan, but you could consider getting a loan on your own as an opportunity to build your credit history and FICO score. If you are successful, you could qualify for better loan terms in the future without ever having put someone else's credit at risk.

Key Terms

• Co-signer: A person who agrees to repay a loan if the primary borrower can't. A co-signer's credit and income help the borrower qualify for better loan terms.

• Soft inquiry: A credit check that lets you preview loan rates and terms without affecting your credit score. Lenders use soft inquiries during prequalification.

• Origination fee: A one-time charge a lender may apply when processing a new personal loan. It's typically a percentage of the total loan amount.

• Secured loan: A loan backed by collateral — like a car or savings account — that the lender can claim if you don't repay. It may be easier to qualify for than an unsecured loan.

• Credit history: A record of how you've borrowed and repaid debt over time. Lenders review it to decide whether to approve your loan application.

Sources:

• Consumer Financial Protection Bureau (CFPB): https://www.consumerfinance.gov/ask-cfpb/

• Federal Trade Commission (FTC): https://consumer.ftc.gov/articles/co-signing-loan

• Experian: https://www.experian.com/blogs/ask-experian/credit-education/

Summary generated by AI, verified by MoneyLion editors

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