With a co-signer, you add one more individual to your loan application. Unlike a co-borrower, it will only be responsible for making your loan payments if you fail to pay.
Bringing a co-signer makes it possible to get better loan terms with bad credit. Let’s find out where you can get the best online personal loan with a co-signer.
Find the Best Personal Loans with Co-signers
Editor’s Thoughts: Upgrade is a lending service that offers co-signer loans for up to 84 months at 8.49% to 35.99% APRs. Lower interest rates are available for setting up Autopay or paying off a portion of your debt directly. However, each loan comes with an origination fee, which can be as high as 9.99%.
Editor’s Thoughts: OneMai Financial is a lending company offering co-applicant personal loans and auto loans between $1,500 and $20,000. The service offers fixed rates between 18% and 35.99% and repayment terms of up to 60 months. However, origination fees of up to 10% can be applied.
Editor’s Thoughts: Rocket Loans allow borrowers to add co-signers to their applications. You don’t need to demonstrate excellent credit to get a loan at an interest rate between 9.116% and 29.99%. However, origination fees can be as high as 9%.
Editor’s Thoughts: At SoFi, you can take out a personal loan with a co-applicant at an estimated APR of 8.99% to 25.81%. You can also get autopay and direct deposit discounts of 0.25% each. SoFi loans come with no late fees. However, they have a high minimum loan amount of $5.000.
BadCredify evaluates lenders based on more than 70 rating criteria, including interest rates, repayment terms, eligibility requirements, fees, consumer experience, affordability, and more. Find out more about our full methodology.
What Is a Co-Signer?
A co-signer is an individual who will be responsible for repaying the loan if an original borrower defaults. To take this responsibility, a person needs to sign your loan agreement along with you. Bringing a co-signer makes it easier for you to qualify for a loan. This is because a co-signer’s income and credit score is also considered. Borrowers often add co-signers to their loans when they want to get a higher loan amount than they initially can or in case they have a bad credit score.
How to Get a Personal Loan with a Co-Signer?
Take the following steps for a smooth process of getting a personal loan with a co-signer:
- Check your credit and financial details. This will help you understand what you should expect from your loan offers. Lenders pay attention to your credit score, income, and DTI, so these parameters should be in tip-top shape for you or your co-signer.
- Compare lenders. Look at a lender’s minimum credit score requirement, pay attention to the minimum income they require, and choose those with the requirements you can meet and the most favorable loan terms.
- Pre-qualify. You can pre-qualify for loans from several loan providers without putting your credit score at risk. Both you and your co-signer should do this to get the clearest possible picture of loan terms you can get.
- Submit your application. Choose a lender with the best terms and submit your loan request form online or in a lender’s store. Your co-signer may also be asked to apply in person or by phone. Then, a lender will perform a hard credit check to estimate your creditworthiness.
- Get the funds. If approved, loan proceeds will be deposited into your bank account within a few business days.
Features of a Good Co-signer
Below are some qualities you should look at when choosing a co-signer:
- Credit score. Try to pick a co-signer with a credit score of at least 670. If you have a poor or very poor rating, it may be better to add one with excellent credit. This is how you will be able to get approved for a personal loan at reasonable interest rates;
- Income. Choose a co-signer whose earnings exceed or at least meet a lender’s income requirements.
- Debt-to-income ratio. The debt-to-income (DTI) ratio shows how much debt your co-signer has compared to their monthly gross income. If this indicator is higher than 43%, lenders may consider such an applicant overburdened with debt. Some lenders may even ask your co-signer to have a DTI of 30% or less if your own DTI is very high.
A Co-Signer or Co-Borrower: What’s the Difference?
While these two terms are often used in the same sense, there are a few legal differences between them.
A co-signer is a person who signs your loan agreement with you and only needs to take part in repaying it if you won’t be able to pay yourself. Such an individual can’t access the information about your loan and has no right to use your loan funds.
A co-borrower is an individual who shares the responsibility of repaying the loan with you from the start. It can access the funds and request information about the loan, including how much you’ve already paid, missed payments, and other financial details.
When Adding a Co-Signer Is a Good Idea?
Loans with a co-signer can suit people with credit issues who want to get a loan at more favorable terms than those offered by bad credit lenders. Here are a few situations when adding a co-signer to your loan request can be a good idea:
- You want to access a higher loan amount. Whether you’re going to get a $1,000 or $10,000 loan, your income may not be enough to qualify. Bringing a co-signer can increase the size of your loan, provided that the individual will have a steady income and a low DTI;
- You don’t meet a lender’s minimum credit score requirements. If you don’t have a good credit score and don’t want to deal with a bad credit lender, adding a co-signer can help you qualify;
- You’re opting for a lower interest rate. Personal loan providers are more likely to give you an unsecured loan at a lower interest rate if you bring a co-signer with strong credit and steady income.
However, co-signed personal loans also require detailed consideration due to the risk they carry.
Risks of a Co-Signed Personal Loan
Co-signed personal loans can be risky at some point. Here are a few drawbacks you should be aware of:
- Both you and your co-signer may face negative effects. Both of you will be responsible for debt if you default on the loan. Additionally, it can result in credit score damage and lawsuits. Before getting a loan, ensure you can make your monthly payments without sacrificing your regular expenses;
- A co-signed loan can affect your credit scores. After you submit your application, a lender will make a hard credit inquiry, which drops your credit rating by a few points;
- Your debt-to-income ratio will increase. This will make it more difficult for you to get a loan in the future.
Does Using a Co-Signer Affect Your Credit?
A co-signer has no impact on your credit. Whether you use a co-signer to take out a personal loan or get one on your own, it will have the same initial impact on your credit. A lender will perform a hard credit check, which can ding your credit score by up to five points. That said, getting a co-signer to help you get approved for a personal loan could help you build credit.
Alternatives to Personal Loans with Co-signers
If you’re looking for a reasonable alternative to personal loans with co-signers, here are several options to pick instead.
Secured Personal Loans
A secured personal loan is when you need to provide a lender with some valuable property to get the funds. A lender will be able to seize your collateral if you default on your loan. Therefore, secured loans can be easier to qualify for with bad credit.
If you need a loan to buy something, consider putting a purchase on your credit card balance. Many credit cards offer a 0% APR grace period. Thus, you can even get an interest-free loan if you manage to repay the funds before the promotional period ends.
Loans from Bad Credit Lenders
Bad credit lenders will never deny you a loan just because of your less-than-perfect credit scores. Their financial products are unsecured and can be obtained quickly, so you can use them as emergency loans. However, they always come with high interest rates.
Borrowing from Family
When you borrow money from your loved ones, you typically don’t need to pay additional interest. You can also get more flexible and favorable loan terms, making your debt easier to handle. However, it’s not always possible to get the needed amount from your family member.
What to Pay Attention to When Comparing Personal Loans with Co-Signers?
As each lender may set its unique terms, personal loans with co-signers differ from each other significantly. Here’s what you should look at when choosing the loan provider to work with:
- Eligibility criteria for both applicants. Make sure you pick a lender with the requirements you and your co-signer can meet. They are typically focused on payment and credit history, income, DTI, and credit score.
- Application procedure. Co-signed loans often have a more complicated application procedure than regular personal loans. While some lenders allow you to apply remotely, others may require you to visit a branch. Just ensure the process will be convenient for both you and your co-signer.
- Co-signer release. Some loan providers offer loans with the ability to release a co-signer from the loan terms after a certain period. However, it may come with some extra requirements and conditions.
- Interest rates and fees. Pay attention to interest rates and origination fees set by a lender. Also, look at the total loan cost and make sure your monthly payments suit your budget.
- Loan amounts. If you need a significant amount for some major life project, make sure a lender can meet your expectations.
- Disbursement times. It may take a lender a few days to verify your data via credit bureaus and transfer the money to you. Keep it in mind before applying.
Through its assessment process, BadCredify evaluates and ranks personal loan offerings from over 40 lenders and financial organizations. We gather information from every lender and cross-check the details on their websites. Customer reviews, earnings reports, and other publicly available records are also reviewed throughout the process.
We go through the pre-qualification procedure and speak with the company representatives to understand how the process works from the inside. Next, we evaluate the terms offered, taking particular note of:
- Interest rates and fees;
- Repayment terms;
- Safety and convenience;
- Funding times;
- Eligibility criteria.
BadCredify’s writers and editors conduct a full fact check and update information annually. If needed, our team also makes updates throughout the year.
A co-signed loan is a joint loan. To get one, you need to bring a co-signer who will be responsible for making your loan payments if you fail. It’s just a regular personal loan, so you can use it for various personal needs, from covering medical bills to making debt consolidation.
Most lenders ask a co-signer to have a credit score of at least 670. The higher the rating, the better loan terms you can get.
If you’re unable to make your loan payments, your co-signer will be forced to pay instead. Additionally, both your and your co-signer’s credit history will be affected.