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Getting Personal Loans With a Cosigner Explained

Personal Loan With Cosigner: How to Apply & What It Is; Looking for personal loan with cosigner? Adding a cosigner can help you qualify for a loan, find out more about cosigned loans with our guide!
Susan Guillory
Susan GuilloryUpdated March 22, 2023
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Getting a personal loan with a cosigner is possible. You may get approved for a personal loan with the help of a creditworthy cosigner even if you have bad credit. As long as your cosigner has good credit and strong income, you may qualify for a loan despite having subprime credit.When you’re looking for personal loans, you may discover that you don’t qualify as an applicant. That might be because your credit score is too low, you don’t make enough money, or you don’t have any collateral to put down (in the case of a secured loan).So should you give up? Not necessarily. As mentioned above, you might be able to get a personal loan with cosigner assistance. Having someone else sign the loan documents and share the responsibility for that loan along with you could be just what you need to qualify for low rates and great terms.

What is a Cosigner?

A cosigner is another person who accepts the financial responsibility of repaying a loan if the primary borrower fails to make a required payment. In theory, even if the loan is yours, if you can’t pay it back, your cosigner agrees to be responsible for doing so.Cosigning a loan gives a cosigner and primary borrower the shared responsibility of making required loan payments. Typically, when you apply for a loan on your own, you sign loan documents taking full responsibility for paying that loan in full. But when you don’t qualify for a loan with great rates on your own, you may be able to add a cosigner.When cosigning a loan, the cosigner shares part of the financial liability but receives no share of the funding. The proceeds of the loan belong to the primary borrower alone, and the primary borrower dictates how the funds of the cosigned loan will be used.Does cosigning hurt your credit? It’s possible your credit score may dip by a few points if you cosign a loan and the lender conducts a hard inquiry into your credit report. You may also ask, “Does cosigning affect my ability to borrow?” Yes, it’s possible a cosigned loan can elevate your debt-to-income ratio (DTI) and make it harder for you to borrow consumer loans in the future.

Reasons to Get a Personal Loan With a Cosigner

Taking out a personal loan with a cosigner could help you get approved for terms and conditions that might otherwise be difficult to get on your own. Lenders who offer large or small personal loans typically want to minimize the risk that a primary borrower won’t pay back the loan.If an applicant doesn’t have established credit or much income, the lender may consider the applicant a risk. A creditworthy cosigner with sufficient income could help a primary borrower get approved for a $10,000 personal loan.

Advantages of Personal Loans with a Cosigner

When your credit is less than stellar, bringing on a cosigner — who might be a parent, spouse, or friend who has established credit — lowers the risk to the lender. The lender may even offer you lower rates and more favorable terms. That’s because now you’re pooling both your cosigner’s qualifications and your own in the application process.If you don’t have good credit, taking on this loan with a cosigner may help you build it. As your credit score grows, you may qualify for other types of financial products, like credit cards.

Disadvantages of Personal Loans With a Cosigner

Does cosigning hurt your credit? As mentioned earlier, it’s possible your credit score may dip by a few points if the lender conducts a hard inquiry into your credit report as a cosigner. The cosigner could also be impacted if the primary borrower falls behind on required payments. Late payments could potentially be reported to a credit bureau, which could impact the credit of the primary borrower and cosigner. The cosigner is responsible for payments if the primary borrower falls short, so missed payments could strain or seriously damage the relationship between the primary borrower and cosigner.You may ask, “Does cosigning affect my ability to borrow?” As mentioned earlier, cosigning a loan could impact your DTI and make it harder for you to qualify for other consumer loans. It could also be harder to borrow if the primary borrower and cosigner miss payments and fall into delinquency or default on the cosigned loan.Another disadvantage of personal loans with a cosigner is that the cosigner may be on the hook for payment if the primary borrower dies. What may happen to a personal loan if a borrower dies is that the cosigner, if there is one, typically has to repay the loan.Recommended: Can a Cosigner Become the Primary Borrower?

Does Personal Loans With a Cosigner Hurt Credit Scores?

As mentioned above, personal loans with a cosigner can hurt the credit scores of the cosigner and primary borrower. The credit scores of the primary borrower and cosigner could decrease by a few points if the lender conducts a hard pull inquiry into the credit reports of the primary borrower and cosigner.The credit scores of the primary borrower and cosigner could also be impacted if the primary borrower and cosigner fail to make required payments on the cosigned loan. Having late payments reported to the credit bureaus could leave a derogatory mark on the credit reports for the primary borrower and cosigner.

Cosigner vs Co-Borrower

To clarify, a cosigner is not the same as a co-borrower.A cosigner shares the financial liability of repaying the loan but is not entitled to any of the loan proceeds. A co-borrower, meanwhile, is someone who takes out a joint personal loan with you, uses the funds with you, and pays back the money with you.When you get a personal loan with a cosigner, the cosigner is there to guarantee that the debt will be paid in the event that you can’t pay it yourself. It may never come to that. Ideally, you’ll be able to make your loan payments on time and in full for the duration of the loan. But lenders like to see that there’s a safety net in case that doesn’t happen.

How Does Using a Cosigner for a Personal Loan Work?

Once you’ve found someone willing to cosign personal loans with you, you can apply for the loan you want, including online personal loans.In the application, you’ll be asked questions about both your income and your cosigner’s, and you may also be asked for both of your Social Security numbers. This will help lenders — such as banks, credit unions, or nonbank private lenders — verify your credit scores.The primary applicant and cosigner may have to provide proof of identity as part of the personal loan requirements.Once you’ve been approved for an unsecured personal loan with a cosigner, both of you will need to review and sign the loan agreement stating that you are both responsible for paying back the loan (or that the cosigner is responsible if you don’t do so on your own).

Requirements of a Cosigner

The personal loan cosigner requirements can vary from lender to lender, but a lender may require cosigners to have good credit and steady income. Other personal loan cosigner requirements may require that the cosigner be at least 18 as a U.S. citizen or lawful permanent resident.A cosigner can be a trusted friend, family member, or partner. If you’re married, you might ask your spouse to be your cosigner. Whoever you choose, have a frank conversation about what cosigning entails. Offer a look at your finances to show that you’re able to pay back the loan, and discuss what would happen if you couldn’t. Cosigners typically don’t expect to actually have to pay for the loan, so if your cosigner is suddenly on the hook for a $500 payment in a few months, it could be stressful!

What Credit Score Does a Personal Loan Cosigner Need?

To help you qualify for a loan, your cosigner may need to have good credit — perhaps a credit score of 700 or above. A cosigner may not be of assistance to you if the cosigner has a subprime credit score at or below 600. In addition, an ideal cosigner may have a steady income and a diverse mix of open-end credit vs. closed-end credit.

What Are the Risks to Consider Before Getting a Cosigner? 

When you apply for a personal loan with cosigner assistance, the cosigner is taking the biggest risk. A cosigner might end up having to pay for your loan, which could be a financial hardship.Additionally, that loan liability may appear on the cosigner’s credit report and may contribute to his or her debt-to-income ratio. If your cosigner decides to apply for a loan or credit card down the road, his or her credit report will likely show the cosigned loan account, which could make it harder for the cosigner to qualify.Your cosigner’s credit score may also take a dip if you don’t pay back your loan on time (as will yours, also). But realize there’s also a risk for you when you take out a personal loan with a cosigner. You’re putting your personal relationship on the line.If you can’t pay back your loan and your cosigner has to take over payments, that may cause a strain in your relationship. More damage can occur if both of you end up defaulting on a personal loan. That could cause serious misgivings between you and your cosigner.

What Cosigners Should Consider Before Signing On

From the cosigner’s perspective, choosing whether or not to cosign your loan is a big decision. Cosigning on a loan may affect the cosigner’s own credit, so it’s important to make sure your cosigner knows what to expect.Don’t be upset if the person you ask refuses to cosign. It’s a decision that can have long-term implications for the cosigner’s credit and ability to borrow money for years. You may encourage your potential cosigner to do his or her own research into the cosigning process and share any knowledge you have about the implications of cosigning a loan.Above all, your cosigner needs to be aware that, if you miss a payment, he or she will be responsible for making that payment. If that doesn’t happen, your credit score and your cosigner’s could drop.Here are some questions that a cosigner may ask before signing on:
  • What happens if the primary borrower misses a required payment?
  • When will the loan be paid off?
  • Is the primary borrower willing and able to make payments on the loan?

Cosigner Rights for Personal Loans

When you ask someone to cosign a loan with you, make sure they understand their rights and responsibilities as a cosigner. These include the fact that even though they are responsible for paying the loan if you miss payments, they don’t own the property or funds the loan is being used for. And if you default on your loan and it goes into collections, the collections agency may pursue your cosigner for payment.

How to Get a Personal Loan With a Cosigner

If you’re ready to move ahead with a cosigner for a loan, here’s how to do it:

Find the Right Person

Choose someone with a strong credit score and credit history that you trust. A parent, spouse, or sibling might be a good option.

Make Sure They Understand the Responsibilities Involved

A cosigner takes on a lot of responsibility, as we’ve discussed. Be sure they are aware of exactly what’s entailed in cosigning a loan and that they’re comfortable with it.

Apply for the Loan

Compare personal loan options and pick the one with the most favorable rates and terms. Make sure the lender you choose to work with allows a cosigner on loans. Then fill out the loan application and provide any documents that may be necessary, such as pay stubs. Your cosigner will also need to put their information on the application.If you’re approved for the loan, you and your cosigner will both sign the paperwork. Make sure you both have a copy for your records. Then you’ll get your loan funds, typically within several days.

Keep the Cosigner in the Loop

Stay in touch with your cosigner about payments. If, at any point, you think you might have to miss a payment, or if you’re experiencing financial difficulties, reach out to the cosigner right away to let them know so they aren’t caught off guard.

What to Do If You Don’t Have a Cosigner

Here are some actions you may take if you need help getting a loan but don’t have a cosigner:
  • Wait. The first is to be patient while you build your credit. You can do that by opening a credit card and paying your balance in full and on time. That activity may be reported to credit bureaus and, over time, may build your credit history.
  • Settle for a smaller loan. You could also consider borrowing less money. Sometimes you only need a cosigner if the amount is over a certain threshold. You may consider going for a small $4K personal loan rather than a large personal loan.
  • Look into secured loans. Consider whether you have any assets you might be able to put up as collateral for a secured personal loan. That could be real estate, your car, or a savings account.
  • Shop around. Different lenders may have different qualifications for applicants, so you may find that you qualify for a loan elsewhere, even if it’s at a higher interest rate. You’ll have to decide if that high rate is worthwhile to get access to cash.

Alternatives to Getting a Loan with a Cosigner

If a personal loan with a cosigner isn’t an option because you can’t find someone willing to be your cosigner, you can explore these other options:
  • Personal loans for bad credit. The lenders who offer these loans may look at other qualifications besides your credit score. These loans may be for lower amounts and may have higher interest and fees, but they may help you build your credit.
  • A credit card, secured or unsecured. People with bad credit or not much credit history may only qualify for secured credit builder credit cards, which require a cash deposit from you. If you make your payments on time, you may eventually qualify for an unsecured credit card, which doesn’t require that security deposit.

How to Remove Cosigner From Personal Loan

For whatever reason, if you’d like to remove a cosigner from a loan, it generally is possible. You may be able to do this with something called a cosigner release form. However, your lender will need to approve releasing the cosigner.Just be aware that you will likely have to meet certain conditions before the cosigner can be released. For instance, you may need to make two years’ worth of consistent on-time payments before the cosigner can be released.Check the terms of your loan to find out what the cosigner release policy is. If you still have questions, ask your lender. If cosigner release is not allowed, or your lender won’t approve it, you could refinance the loan so that it’s in your name alone. You’ll need to be able to qualify for a loan on your own, so you may want to work on building your credit in the meantime.

Build Your Credit to Qualify for Better Financing

You may not need a cosigner if you can build your credit and qualify for better financing on your own merits. It takes time to build your credit, but as you do, you will probably qualify for more types of loans and credit cards.

The Takeaway

Having a cosigner on a loan may be what you need to qualify for better rates and start to build your credit. Just be aware of what this means for both you and the cosigner, because if you aren’t able to pay your loan, you could put that person in a difficult situation.Lantern by SoFi can help you find online personal loans. You can compare personal loans interest rates from multiple lenders all in one place so you can easily make a decision about what works best for you.Find personal loan offers with Lantern.

Frequently Asked Questions

Can you get a personal loan with a cosigner?
Can you get a personal loan with bad credit with a cosigner?
Does my credit matter if I have a cosigner?
Does a cosigned loan build credit?
What happens if I cosign a loan?
Why would someone need a cosigner on a loan?
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About the Author

Susan Guillory

Susan Guillory

Su Guillory is a freelance business writer and expat coach. She’s written several business books and has been published on sites including Forbes, AllBusiness, and SoFi. She writes about business and personal credit, financial strategies, loans, and credit cards.
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