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Personal Loans with Cosigner

Personal Loans With a Cosigner: What Are They, the Pros and Cons, and How to Apply

Updated on December 29, 2022


Personal loans are convenient if you need extra funds for emergency expenses. Unlike a mortgage or auto loan, you can use these loans for more than a single, predetermined purpose. They are thus simple to apply for. But what if you don't qualify or get approved for a personal loan?

Getting a loan from a personal loan direct lender on your own may be challenging if it's your first loan, don't have a consistent income, or your credit score is low. If that's the case, a cosigner with a solid financial background can help maximize your likelihood of getting loan approval with favorable terms.

If you're considering getting a personal loan with a cosigner, the more you know about it, the better. So, read on to learn everything you need to know before signing a loan agreement with another person.

What is a Cosigner?

A cosigner is a person who signs the loan agreement with the primary borrower, agreeing to take on the legal responsibility of repaying the loan balance if the primary borrower doesn't. A second person promising to repay the loan assures your lender that the loan payments are made on time and in full. For this reason, using a cosigner can make qualifying for a loan easier. When deciding whether to approve the loan, the lender may consider both your credit and the cosigner's credit.

Who Can Be a Cosigner?

Your family member, friend, or spouse can be a consigner. However, along with a personal relationship with the primary borrower, a potential consigner also needs to have the following qualities:

  • Ability to make monthly loan payments if you can't
  • Have a good or excellent credit score with several years of responsible credit use
  • Have a healthy, steady debt-to-income ratio

Cosigner vs. Co-borrower

Although cosigners and co-borrowers share some similarities, there are significant legal distinctions between the two that you should remember.

The key differences between a cosigner and a co-borrower are as follows:




Purpose of borrowingThe loan is applied for the sole purpose of the primary borrower.Both borrowers have a common purpose behind applying for a loan.
Access to fundsThe cosigner doesn't have access to the borrowed funds.Both borrowers have equal access to loan funds.
Repayment of loanA cosigner is only liable to make payments for the loan if the primary borrower cannot keep up with payments.The co-borrower is equally responsible for repayment as the primary borrower from the beginning.
Ideal personParent, close relative, or friendSpouse or business partner
ExampleWhen your parent becomes a cosigner and helps you get a personal loan with a low APR, but the funds will be used by you.You and your spouse apply for a loan to buy a vehicle that both of you will use. Here both will be equally responsible for repaying the loan.

What is a Personal Loan With a Cosigner?

When you struggle to get a personal loan due to a low credit score or income, you can use a cosigner to help you get qualified for a personal loan. It's also important to note that not all lenders will allow you to apply with a cosigner. But those who do can help you receive a loan at a lower interest rate when you add a cosigner with an excellent credit history. A personal loan taken out with a cosigner is considered less risky in the eyes of the lender as they can get their funds back even if the primary borrower defaults. A lender may be okay with offering lower rates if there is no danger involved, which is what a personal loan with a cosigner delivers.

How Does an Online Personal Loan With a Cosigner Work?

Borrowers frequently look for a cosigner because they know that getting approved for a personal loan by themselves will be difficult. A cosigner is someone who applies for an online personal loan and signs the loan agreement with you. This means the cosigner agrees to ensure that your loan is repaid in full and on time if you cannot.

Lenders will evaluate the cosigner's financial situation in the same manner as they will the primary borrower during the application process. The caveat is that the lender's requirements may demand that the cosigner has a good credit rating, typically one higher than the principal borrower.

Even if they are legally responsible for debt repayment, a cosigner might not have any ownership interests in the goods or services bought with the funds. To put it another way, offering to be a cosigner is a kind gesture.

When is Adding a Cosigner a Good Idea?

When is Adding a Cosigner a Good Idea?

Banks and other lenders may view you as a credit risk if your credit report is less than stellar, and they may be more likely to reject your loan application. If you can add someone with better credit, higher income, and low debt to strengthen your loan application, you should do it.

Here are some situations when adding a cosigner would make more sense:

When You Have Bad Credit:

The minimum credit score needed to qualify for a personal loan can vary from lender to lender. However, most conventional lenders require a minimum of roughly 580 to 600. Your chances of getting approved for a loan can increase with a high credit score of a cosigner.

When You Need Funds For A Large Purchase:

Lenders offer larger loans to applicants with an impressive credit history, so including a cosigner could help you increase the size of your loan.

When You Don't Have A Steady Income:

Some lenders require the applicant to meet the minimum income requirements to qualify for a loan. A cosigner can fill the gap if you don't meet the minimal threshold or don't have a steady income.

When You Want A Low-Interest Rate:

Since the APR influences your monthly payments, including a cosigner may help you get a loan with a lower rate and, consequently, make it a less expensive loan.

Applying for a joint loan might be good if you have problems acquiring a personal loan, even with a cosigner.

Pros and Cons of Loans With a Cosigner

Knowing how these loans work and when it is right to use a cosigner is crucial. Before applying, you should also be aware of the benefits and risks to the borrower of using a cosigner.


  • Qualify for a loan: The most obvious benefit of adding a cosigner is increasing your chance of loan approval. Anyone with bad credit can find that having a cosigner with good to exceptional credit makes it easier for them to qualify for loans.
  • Rebuild your credit: You can build a strong credit profile by taking out a loan and repaying it on time. You will only have this chance if you get approved for a loan. So, a cosigner can make it easier for you to get a loan and raise your credit score.
  • Better terms and lower interest: Without a cosigner, you could get a loan, but you might not be able to secure the most favorable terms or lowest rates. A cosigner can help you get a loan for a reduced interest rate and save money. You can also get loan approval for a bigger loan if necessary.


  • Missed payments can lower credit scores: Missing loan payments may harm your and your cosigner's credit scores. It could, in turn, significantly impact your and the cosigner's ability to obtain additional loans in the future.
  • Damage relationship with the cosigner: The cosigner takes a considerable risk of making payments for the loan if you fail to make payments in the future. Your relationship with the cosigner may suffer if that occurs.

Things to Consider Before You Apply

You must consider two important points before applying for a personal loan with a cosigner. First, you should determine your need for the loan. Second, find the right lender that allows you to add a cosigner.

Determining Your Need

If you've made some financial mistakes in the past or have started to build credit, you may have a poor chance of qualifying for a personal loan on your own. Having a cosigner may increase your chances of getting approved for a loan. By using a cosigner, you're binding a credit-worthy individual to repay the debt in the event of your default.
Even if you can borrow a higher amount with a cosigner, you should only borrow based on your ability to repay, not the cosigner's. Make sure you discuss your repayment strategy with the potential cosigner. Keep them updated on any financial difficulties you may have if you want to avoid jeopardizing your relationship with them.

Find The Right Personal Loan Lenders

Not all traditional lenders accept cosigners. However, several online lenders do offer personal loans. It's a good idea to pre-qualify with a few lenders and learn about their offerings before submitting a loan application for a personal loan with your cosigner. In this manner, both the primary borrower and the cosigner can ensure they receive the best possible offer.

How to Get a Personal Loan With a Cosigner?

Depending on the lender you select and your state's law, the loan application procedure could change slightly. Here are some general steps you might need to follow to get a personal loan with a cosigner:

Step 1- Know Your Credit Score

It's a good idea to know your situation before applying for loans or even exploring your options. The types of loans you can get, with or without a cosigner, can depend on your credit score. Knowing the credit score and history of your potential cosigner is equally essential.

Step 2- Find Your Lender

To choose the best option that suits your needs, evaluate the rates and terms offered by the lenders with whom you can pre-qualify. When you go through the prequalification procedure, a lender can inform you of your eligibility for a personal loan with a cosigner and the possible interest rate. 

Step 3- Prepare Your And The Cosigner's Documents

To speed up the application process, you can keep the documents the lender will require ready. Applying for a personal loan is easy, especially if you're dealing with an online lender. However, you and your cosigner can keep the following documents handy for a smooth application process:

  • Driver's licenses or other identification proof
  • Social Security numbers for proof of residence
  • Bank statements, pay stubs, or W-2 forms as proof of income

Step 4- Submit Your Application

It's time to file a formal loan application after you've finished your research and chosen a lender. At this stage, you and your cosigner will need to give a variety of personal information, including your name and other identifying information, as well as data on your employment, income, and past debts.

Step 5- Get Approved And Sign The Agreement

Once the lender approves your loan application, you and your cosigner must sign the loan agreement to get the funds. It is essential to thoroughly read the loan contract before signing it. After signing, you will receive the funds.

How to Choose the Best Personal Loans With a Cosigner?

How to Choose the Best Personal Loans With a Cosigner?

You and your co-applicant must clear additional hurdles when applying for a personal loan with a cosigner. Before submitting a loan application, take into account the following criteria to choose the best personal loans with a cosigner:

  • Easy requirements to qualify as a cosigner
  • Transparency in interest rates and origination fees
  • Flexible loan amounts and repayment terms
  • Offers the chance to pre-qualify with a soft credit check

Is It Easier to Obtain a Loan With a Cosigner?

Yes, if the cosigner has a better credit rating and income than you, it is easier to get a loan. Compared to applying for a personal loan by yourself, you might only have to fill in a few extra details relating to the cosigner to apply for the loan.

For the lender, it can be quicker for you to get approved for a loan if your cosigner has good credit and a track record of timely debt repayment. It's because having a cosigner reduces the risk for the lender when they provide you with a loan. Lenders will hold two people responsible for compensation instead of just one.

Usually, the loan requirements for cosigners and borrowers are the same. The cosigner must produce proof of income and meet the loan's credit conditions.

Will It Hurt the Cosigner’s Credit Score When You Apply for a Loan?

As long as you make all the payments on time, a cosigner could assist you in getting approved for a personal loan and improve your credit. If you miss a payment or the loan defaults, there is a risk to your and the cosigner's credit histories. Before you ask someone to cosign, confirm they know the risks and their rights as a cosigner.

What is the Impact of a Cosigner on the Interest Rate?

In most cases, a borrower with a cosigner may be able to get a loan with significantly lower interest rates than they would be able to get on their own. The increased security that comes with the cosigner's credit score enables a lender to be more flexible with the APR they would charge.

How Much Can I Borrow by Getting a Loan With a Cosigner?

The amount you can borrow with a cosigner is flexible. What a lender can offer and what you are eligible for will likely determine how much you qualify to borrow. Your eligibility for a loan, whether you have a cosigner or not, will often depend on various factors. These include your credit score, income, debt-to-income ratio, state of residence, and other variables.

What Happens if I Am Not Able to Repay Cosigner Loan?

Even if you borrowed the funds for your use and cannot repay it, your and your cosigner's credit score will be affected. Your lender may request that you or your cosigner make the payment because both of you are legally liable for the loan's repayment.

Your co-applicant will have to make the remaining payments until the loan is repaid. If not, you both run the risk of defaulting on the loan. In this situation, your loan might be given to a debt collector who will try to collect it or file a lawsuit against you and your cosigner.


Even if you have bad credit, getting a loan may sometimes be necessary. It can be simpler to get better rates if you have a cosigner.

After careful deliberation, if you've finally decided to get a cosigner for a loan, make sure you have a sound repayment strategy and evaluate different loan offers. You should also make a point to ensure that the cosigner is well aware of their responsibilities to avoid damaging your relationship with them.

You can help improve your credit by making loan payments on time. And once you're successful, you might not need a cosigner to get approved for a loan.

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Harita Solanki

Harita Solanki is a passionate advocate for personal finance and believes in empowering individuals to take control of their financial lives.

Her expertise covers a wide range of personal finance topics, including budgeting, saving, credit, debt management, and retirement planning.

With over six years of dedicated experience in the finance industry, Harita has helped countless readers of CASH 1 Loans make informed decisions and achieve their financial goals.

As a dedicated writer, Harita has contributed to numerous financial publications, sharing her knowledge and insights to help readers navigate the complexities of personal finance.

Her writing style is approachable, concise, and tailored to the needs of everyday individuals looking to improve their financial well-being.