Personal Loans With A Co-Signer

Some lenders allow applicants to apply for a loan with a cosigner. A cosigner can be used to share responsibility for the loan or to increase your chance of approval. Similar to the primary applicant, though, the cosigner needs to meet certain requirements. If the cosigner is a stronger applicant, they may assume the role of the primary applicant: a primary applicant and a cosigner share equal responsibility for the loan. Here are some general rules to consider when choosing a cosigner.

• What is your relationship with the cosigner? A cosigner should be a friend or family member, someone you know and trust. They will need to have tremendous trust in you as well. It’s important to consider the relationship of the cosigner and be honest with them. If you are going to miss a payment or payments, communicate with them. If you default on the loan, both credit scores can be impacted. Cosigning can take a toll on a relationship, so have the hard conversations upfront to lay down the boundaries and learn what’s important to the cosigner and/or how they prefer you to handle certain situations. For example, are they willing and able to cover a payment if you can not?
• Do they have a good credit score? A cosigner should increase your chance of approval and or help you qualify for a competitive offer. If the cosigner has a worse credit score than you, they may still help you qualify, but they may not serve their intended purpose.
• Are they willing to cosign? A cosigner must be willing to cosign. They will need to complete their portion of the application.

Cosigning on a loan is a big decision. You are equally as responsible for the loan as the primary applicant. To protect yourself, have a conversation prior to cosigning to encourage the applicant to communicate if they are going to miss the payment. Additionally, monitor the loan. Do not cosign and rely on the applicant to handle things. Just as if you were the applicant, ensure monthly payments are made on time. Lastly, use your judgment. Most of us have the desire to help others, but it’s okay to be selfish if you feel it will end poorly.

Loan applications can be denied with a cosigner. When applications are declined, usually the whole application (primary applicant and cosigner) is denied. However, applying with a cosigner who doesn’t qualify can impact the loan decision. Some lenders may opt to consult the applicants before denying the loan application. As a co-signer, the loan is reflected on your credit report. Be mindful when cosigning that you are taking on more debt, which can impact your chance of approval for future loans.

To cosign a loan, you should have a good credit score and meet the requirements set forth by the lender. You may also have to provide supporting documentation such as proof of income and or identification. A cosigner will need to meet the same requirements as the primary applicant, such as having a social security number, qualifying credit score, income, and more.

Applying for a personal loan with a cosigner can increase your chance of approval. However, it’s not guaranteed you will qualify. Before applying for a loan with a cosigner, it can be helpful for both parties to check their credit score. You will want to ensure that the cosigning relationship can be beneficial to both parties. Generally, joint loan applications are used by married couples who wish to apply together or applicants who might not qualify on their own. They can also be used to help a bad credit borrower qualify for a more competitive loan.