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Personal loans with a cosigner | Here’s Everything You Should Know

Personal loans are a good place to look when you need cash. They are reliable, fast, and can be used for any purpose. Whether it’s to sort out your rent, medical bills, school fees, or wedding, personal loans can come in handy.


However, getting one with a poor credit score is close to impossible. And, viable options for people with poor credit scores will see you part with higher interest rates. Plus, you’ll probably have unfavorable loan terms.


Getting a trusted third party with a stellar credit profile and strong income will help. And, that’s where cosigners come in. They’ll help you to qualify for personal loans without sharing any responsibilities.


This article will get you started with personal loans with a cosigner. But first, take a look at the top lenders for this loan;

  • Representative APR
  • Amount
  • Credit score
Navy Federal Credit Union
  • 17.49%–18.00%
  • $250 to $50,000
  • 580
  • 3.99%–16.99%
  • $5,000 - $100,000
  • 670
  • 8.05%–35.89%
  • $1,000 - $40,000
  • 580+
  • APR range
  • Fees
  • Terms
  • Amounth
  • Unemployment protection
Bank 1
  • 6.95%–35.89%
  • Up to 5% transfer fee
  • 3–5 years
  • $1,000–$40,000
  • No
Bank 2
  • 6.95%–35.89%
  • Up to 5% transfer fee
  • 3–5 years
  • $1,000–$40,000
  • No
Bank 3
  • 6.95%–35.89%
  • Up to 5% transfer fee
  • 3–5 years
  • $1,000–$40,000
  • No

Table of Contents

How do personal loans work?

In this kind of arrangement, a borrower with a poor credit score brings in a third party with a stellar credit profile to apply for a personal loan.


Banks, credit unions, and online lenders all offer co-signed loans. They often attract lower rates since lenders consider them less risky. The reason that it’s easier for a loan involving 2 people to be repaid than that with a single borrower. 


The lender approves the loan based on the co-signer’s credit profile. So, the borrower doesn’t really have to have a good credit profile to qualify. 


Mortgages and automative loans are the most common with co-signed loans. The borrower doesn’t share any responsibilities of the loan. They are neither involved in deciding how to utilize the loan proceeds nor in repaying the same. 


However, the failure of the borrower to repay the loan will also affect the cosigner’s credit profile. And, in case the lender takes any recovery steps, even the cosigner will be affected.


That includes being sued by the lender or any legal procedures for that matter, should there be delayed repayments, mostly 90 to 180 days after the due date. 

Hot Tip:

Remember, these loans lead to damaged relationships with the cosigners should the borrower default payments.

Requirements to qualify

Different lenders have different aspects they check for in a lender to decide whether or not to approve co-signed loans.


Like with other loans, the borrower must be legally residing in the United States. You must have also attained the legal age, usually 18 years in most states.


You’ll then submit a formal application with such details as your name, address, social security number, and income source. You’ll also include the name and details of your co-signor. 


For verification, the lender will require a copy of your ID, valid driving license, or travel passport. 


A credit score of above 600 for the co-signor is desirable for most lenders. The lender will also look at the loan history, source of income, and debt-to-income ratio of your co-signor. 


Though not a requirement, be sure to consider your relationship with your chosen co-signor. Those who have their relatives as their co-signors have a higher chance of getting approved for the loan.


Ensure you shop around for the best lenders. Compare their rates and go for the ones who best meet your needs. The lenders above have the best rates and loan terms.

What do you need to know about co-signed personal loans?

The basic fact about co-signed loans is that they involve two people, the borrower, and the cosigner. Only the borrower has the right to the funds. However, the co-signer agrees to be responsible for the loan and will be held liable should the borrower fail on repayment.


Cosigned loans generally attract lower interest rates since they are less risky to the lenders. You’ll pay between 4.49 and 35.99% on interests with most lenders. You are also liable to a discount, usually 0.5% when you sign up for autopay.


Unlike mortgages, personal co-signed loans don’t have a specific use. The decision of how to use the funds lies with the borrower. You can, therefore, use the funds to pay for rent, hospital bills, support a business, improve your home or buy an asset. 


Co-signed loans take a short time to be processed and approved. Depending on the lender, you’ll mostly receive your funds within 24 hours of approval. 


The repayment terms for co-signed personal loans differ based on the lender in question, credit profile of the co-signor, among other factors. You’ll have up to 7 years to service your loan with most lenders. 


Since you already have a co-signer, you don’t need collateral. This makes the loans less risky to borrowers since they won’t have to risk any property. 

What’s the difference between a co-signed loan and a joint loan?

The two loan products tend to be confusing with most borrowers since they both involve third parties. However, they are not similar.


For cosigned loans, the co-signor doesn’t have the right to the funds. It means he/she has no say and isn’t involved in deciding how the funds will be used. However, both companies are held responsible for repayment.


Should the borrower fail to repay, the cosigner will bear that responsibility. And, both their credit profiles will be affected. 


Cosigned loans are mostly for borrowers looking to crack higher loan limits, better repayment terms, and lower interests. They are also for borrowers who don’t qualify for personal loans due to poor credit scores.


Co-signors have no access to the details of the loan such as the repayment amounts and when the loan is due. They also won’t know when you’ve missed your repayment.


In joint personal loans, the borrowers have equal rights to the loan. They, therefore, share both the responsibilities and benefits. They’ll, therefore, decide together how to use the funds or assets bought by the proceeds of the loan.


Unlike in co-signed loans, for joint loans, all the borrowers have to meet the minimum requirements of the lender to be offered a loan. 

How much can you borrow?

From our selected lenders above, you can borrow between $1,000 and 100,000 with cosigned personal loans. Lightstream, an online lender, offers the highest amount on the list.


Online lenders are known for offering higher loan amounts at lower rates. Since they don’t have physical offices, they save on normal operational costs. The money saved is then offered as loans and used to lower rates for borrowers. 


So, who your lender is will greatly determine how much your borrowing limit will be. Prioritize online lenders for the highest amounts.


Your co-borrower’s credit profile is also a crucial determinant of your loan limit. Those with stellar credit profiles, basically above 600, qualify for larger loans with most lenders. They’ll also likely pay lower interest rates with flexible loan terms.


With time, strive to build your credit profile too. You can boost your score by paying your bills on time. That includes utility, phone bills, and rent. Also, repay your existing loans. That includes credit card debts and student loans.


Prompt repayments will have your lender updating your credit profile positively. It will also be an indicator to future lenders that you can be trusted to repay your loans.

Hot Tip:

Don’t max out your credit card. Its recommended that you keep the usage at nothing above 30%.

Pros and Cons of cosigned personal loans

Pros Cons
Guaranteed approval – You greatly improve your chances of qualifying for a personal loan when you have a co-signor. Lenders will readily offer you a loan if your co-signor has a stellar credit profile and strong income
Late or missed repayments will negatively affect your credit profile and that of your cosigner
Flexible loan terms- Most lenders view cosigned personal loans as less risky. Therefore, apart from approving them easily, they will also offer you a flexible repayment term
Risk of damaged relationship with the cosigner – both the borrower and the cosigner are held responsible for repaying the loan. Should the borrower be unable to repay the loan, the cosigner will carry that responsibility. That will likely lead to a damaged relationship with a friend, relative, or spouse
Improved chances of larger loan amounts – having a cosigner with a good credit score and source of income improves your chances of qualifying for higher loan limits than what you normally would qualify for
Reduced chances of qualifying for other loan products – taking a new loan results in an increase in an individual’s debt-to-income ratio. And, that will scare away most lenders who think you’ll not be able to afford to repay a new loan. That becomes a disadvantage to the cosigner
Loans for borrowers with poor credit scores – qualifying for a loan with a poor credit score is almost impossible with most lenders. However, even borrowers with bad credit scores can qualify for loans as long as they have cosigners with good credit scores
Boosts your credit profile – making timely repayments of your loan will have the lender constantly updating your credit profile. This way, you’ll end up with a good credit profile

Co-borrower loans

A co-borrower is anyone appearing on the loan application paperwork whose credit profile and income have been used to qualify for a specific loan product. Here, all the parties are responsible for using and repaying the loan.


That includes having all the co-borrowers’ names on the title bought by the proceeds of the loan.


Most co-borrower loans are taken up by married couples and relatives. And, most of them are mortgages for vehicles and homes.


Because each party in co-borrower loans bears equal responsibilities, all of them will be required to meet the minimum requirements of the lender. That includes having the required credit score and income.


Co-borrower loans tend to attract lower interests. Lenders view them as low-risk loan products. Plus, a loan involving more than one borrower is more likely to be repaid.

Frequently Asked Questions (FAQ)

Yes. Having a cosigner with a stronger credit profile and income makes lenders more confident about your possibility of repaying the loan. Hence, they’ll easily issue it. A relative, friend, spouse, or any trusted person can be your cosigner.

Yes. As long as your cosigner has a good credit score and strong income, they’ll most likely help you meet the lender requirements for a personal loan.

Most lenders may not mention the exact credit score. However, a cosigner should generally have a good to exceptional credit score. Anything above 670 is good with most lenders. Be sure to check out what your lender’s requirements are.

Traditional banks, online lenders, and credit unions all offer cosigned personal loans. The table above has the top lenders in the industry today. Be sure to check them out.

That depends on your lender. However, to qualify for personal cosigned loans, you need a cosigner with a good credit profile. Your credit score may not hold too much weight.

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