Young man cosigning on a loan

Getting A Personal Loan With A Cosigner


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If you’re struggling to qualify for a personal loan, a cosigner with good credit may be able to help.

If you’re in need of a personal loan but don’t meet the lender’s qualifications, a cosigner may be the answer. A cosigner is someone who agrees to repay the loan if you can’t. They are usually a family member or friend with good credit.

What is a personal loan?

A personal loan is a loan that can be used for personal things, such as large purchases or debt consolidation. Personal loans usually have a lower interest rate than credit cards. You can often get a personal loan with a cosigner to help you qualify. If you’re thinking about taking out a personal loan, compare interest rates and terms before you apply.

Personal loans can be a great way to get the funding you need for a large purchase or consolidate debt. However, not everyone qualifies for a personal loan on their own. If you have good credit but don’t meet the income requirements of some lenders, you may still be able to get a personal loan by applying with a cosigner.

How a cosigner can help me obtain a personal loan

A cosigner is someone who accepts to take equal responsibility for repaying a loan. This person signs a loan with another person (the borrower) and functions as a backup when the borrower isn’t able to repay it. The cosigner is often a parent, spouse, or friend of the borrower.

The reason you might need a cosigner is so that you can ‘promise’ the bank that your debt will be paid. If you fail to make payments, your co-signer is responsible to cover for you. Especially for people who don’t have much of a credit history yet, having a cosigner shows the bank that your debt won’t become their problem. Besides reassuring the bank (or the lender) that they’ll get repaid, applying for a personal loan with a cosigner has additional personal benefits to the borrower:

  • Building credit and a credit history
  • Qualifying for lower interest rates
  • A better range of loan offers and amounts

The loan application process with a cosigner

Applying for a loan with a cosigner is similar to when you apply for a personal loan alone, but there are some extra steps. 

  1. Learn if the bank of your choice offers cosigning loans. If not, continue your search online to make sure you find a trusty bank with beneficial interest rates and repayment conditions. 
  2. Select a cosigner who has good credit, a stable income, and is trustworthy. Make sure you explain all the pros and cons of cosigning to them so that they know what to expect and how cosigning affects them and their credit score.
  3. Compare the loan you want when applying alone versus with a cosigner. Even if you qualify alone, interest rates might drop significantly when you introduce a cosigner. Here is a handy tool to calculate your total loan payment, total interest, and your monthly payment for a personal loan.
  4. File the application with your cosigner! Submit all the necessary documentation of you and your cosigner and apply for a personal loan. 

My USA Finance has a team of experts available to support you every step of the way, to help you get the personal loan you need!

Is cosigning beneficial to both parties?

Cosigning a loan is most beneficial for the borrower and might even limit the cosigner’s borrowing power and lower their credit scores. Based on the debt to income ratios, cosigning for someone does reflect on your credit reports as if the debt is yours. Needless to say, cosigning isn’t without danger. If you don’t make a payment on time or don’t pay at all, the cosigner must pay. Paying late can even harm the cosigner’s credit!

But there are benefits that go beyond just helping out a friend or relative. Being a cosigner can build credit (as long as the borrower pays on time) as it shows positive payment history. Having this additional loan also indicates a mix of credit accounts that show reliable repayments on several accounts. 

Before cosigning, make sure both parties know the consequences and what is expected of them. Go over the financial responsibilities together and keep in mind that signing for a loan is often a multi-year obligation. Your cosigner functions as a backup. You are the person responsible for the loan and for making payments in time.

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