Personal Loans with Cosigners: Everything You Need to Know

If you’re considering taking out a personal loan but are worried about qualifying on your own, getting a personal loan with a cosigner may be a good option. A cosigner can help you get approved for a loan and potentially secure better terms. In this comprehensive guide, we’ll explore everything you need to know about cosigned personal loans.

What is a Personal Loan with a Cosigner?

A personal loan with a cosigner is a loan where another person agrees to be equally responsible for repaying the debt. The cosigner, who typically has stronger credit than the primary borrower, acts as a guarantor on the loan. This gives the lender additional assurance that the loan will be repaid.

Some key things to understand about cosigned personal loans:

The cosigner is legally obligated to repay the loan if the primary borrower cannot
The loan appears on both the primary borrower’s and cosigner’s credit reports
Late payments or defaults will negatively impact both parties’ credit scores
Cosigners don’t have access to the loan funds or any ownership of assets purchased

Benefits of Getting a Personal Loan with a Cosigner

There are several potential advantages to applying for a personal loan with a cosigner:

1. Increased Chances of Approval

Having a cosigner with good credit makes you a more attractive borrower. This can help you get approved for loans you may not qualify for on your own, especially if you have limited credit history or a low credit score.

2. Better Interest Rates

A cosigner with excellent credit may help you secure a lower interest rate than you’d get by yourself. Even a small reduction in APR can lead to significant savings over the life of the loan.

3. Higher Loan Amounts

Lenders may be willing to approve you for a larger loan amount with a cosigner, since there’s less risk from their perspective.

4. Opportunity to Build Credit

If you make timely payments on a cosigned loan, it can help improve your credit score over time. This may make it easier to qualify for loans on your own in the future.

Potential Drawbacks of Cosigned Personal Loans

While there are benefits, cosigned loans also come with some risks to consider:

The cosigner is fully responsible for repayment if you default
Late payments will damage both parties’ credit scores
It may strain your personal relationship if you struggle to repay
The cosigner’s debt-to-income ratio will increase, potentially making it harder for them to get their own loans

Who Can Be a Cosigner on a Personal Loan?

A cosigner can be any adult with good credit who is willing to take on the responsibility. Common cosigners include:

Parents
Siblings
Other close relatives
Spouses or partners
Close friends

The ideal cosigner will have:

A strong credit score (usually 670+)
Stable income
Low debt-to-income ratio
Long credit history

How to Get a Personal Loan with a Cosigner

If you’re interested in applying for a personal loan with a cosigner, here are the basic steps to follow:

Check your credit and gather financial documents
Research lenders that allow cosigners
Compare loan offers and terms
Choose a cosigner with strong credit
Apply jointly with your cosigner
Review and sign loan documents if approved

Top Lenders for Personal Loans with Cosigners

Not all lenders allow cosigners on personal loans. Here are some top options to consider:

Lender	APR Range	Loan Amounts	Key Feature
LightStream	7.99% – 23.99% with autopay	$5,000 – $100,000	Same-day funding available
SoFi	8.99% – 23.43% with autopay	$5,000 – $100,000	Unemployment protection
Laurel Road	8.99% – 23.99% with autopay	$5,000 – $45,000	Cosigner release option

Be sure to compare offers from multiple lenders to find the best rates and terms. Many lenders allow you to check your rate with a soft credit pull that won’t impact your credit score.

Alternatives to Cosigned Personal Loans

If you’re having trouble qualifying for a personal loan, there may be other options to consider besides getting a cosigner:

Secured Personal Loans

These loans require collateral like a car or savings account. They may be easier to qualify for since they’re less risky for lenders.

Credit-Builder Loans

These small loans are designed to help build credit. The money is held in a savings account while you make payments to establish a positive payment history.

Peer-to-Peer Lending

Online platforms connect borrowers with individual lenders. They may have more flexible criteria than traditional banks.

Local Credit Unions

Credit unions often have more lenient requirements and lower rates than big banks, especially for existing members.

FAQs About Personal Loans with Cosigners

Does a cosigner have to be a relative?

No, a cosigner does not have to be related to you. However, they should be someone you trust who has a strong credit history.

Can I remove a cosigner from a personal loan?

It depends on the lender. Some offer cosigner release after a certain number of on-time payments. Otherwise, you’d need to refinance the loan in your name only.

Will cosigning affect my credit score?

Yes, the loan will appear on both the primary borrower’s and cosigner’s credit reports. Late payments will negatively impact both parties’ scores.

What happens if I can’t repay a cosigned loan?

The cosigner becomes fully responsible for repaying the remaining balance. The lender can take legal action against both parties to collect the debt.

Is a Personal Loan with a Cosigner Right for You?

Getting a personal loan with a cosigner can be a good way to qualify for better rates or larger loan amounts. However, it’s important to carefully consider the risks and responsibilities involved.

Only take out a cosigned loan if you’re confident in your ability to repay it on time. Make sure you have a clear plan for how you’ll use the funds wisely and meet the monthly payments without strain.

Talk openly with your potential cosigner about their responsibilities and any concerns they may have. Lay out expectations, like when and how you will make payments. Be transparent to avoid damaging trust if issues arise later.