personal loans with a cosigner

personal loans with a cosigner

Getting a Personal Loan with a Co-signer

Getting a Personal Loan with a Co-signer

Thursday, 1 March 2018

Getting a personal loan can be a smart option for someone who needs money to pay for urgent home repairs, consolidate high-interest debt, or simply gain access to cash.

If you're concerned about whether you could qualify for a personal loan on your own, getting a co-signer could help your chances. When someone co-signs a loan with you, they essentially tell the lender, “I will make the payments on the loan if the other borrower cannot."

Things to consider when getting a personal loan with a co-signer

Leslie Tayne is a New York attorney who focuses on debt resolution and financial management. “Anyone with a poor or insufficient credit history may be required to have a co-signer on a loan. In many cases, teens and young adults who are building their credit from scratch will end up having their parents co-sign on a loan or credit card," Tayne says.

Co-signing a loan can affect the credit scores of both signers. “If the main borrower makes late payments or defaults on the loan, this can negatively impact both of your credit scores. On the other hand, if the borrower makes on-time payments for the duration of the loan, you could both see a boost in your scores," Tayne says.

And once a person co-signs a loan, it's unlikely they can take their name off the loan before it's paid in full. “In cases where they can be removed, it can be a lengthy process and is typically only allowed after they have been on the loan for a while and the main borrower has had a history of making on-time payments," Tayne says.

Of course, when you take out any kind of loan, you plan to pay it back. But repayment takes on even greater importance when someone else's credit is at stake. You might want to try to accelerate the payments to get the loan paid off as soon as possible Tayne says.

“You don't want to leave them on the hook for the loan or have them negatively impacted in any way. At the very least, you'd want to ensure you can afford the minimum monthly payment," Tayne says.

Should you agree to co-sign a loan?

If you've been asked to co-sign a loan, you need to fully understand the implications.

“It is extremely important that you as the co-signer trust the person who you are co-signing for," Tayne says. “Even if the person you are signing for is trustworthy, unforeseen circumstances such as death, serious illness, job loss, or other financial hardship can happen to anyone. You must be accepting of the fact that you may become responsible for the loan at some point."

Both the borrower and the co-signer could be subject to having assets frozen and wages garnished if the debt isn't repaid. And defaulting on the loan will likely have a serious negative impact on both borrowers' credit scores.

“Failure to pay by either one of you may even result in collection activity, including lawsuits," Tayne said.

She added that assuming any debt, including taking on a personal loan, can affect your debt-to-income ratio. So if you plan on shopping for your own loans or credit in the near future, co-signing a loan with someone else might not be in your best financial interest.

Before taking out a loan or agreeing to be a co-signer, it's smart to check with a trusted financial adviser to see what's best for your situation.

The content provided is for informational purposes only. Neither BBVA Compass, nor any of its affiliates, is providing legal, tax, or investment advice. You should consult your legal, tax, or financial advisor about your personal situation. Opinions expressed are those of the author(s) and do not necessarily represent the opinions of BBVA Compass or any of its affiliates.

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Should You Apply for a Personal Loan with a Co-Applicant or Cosigner?

Updated: February 12th, 2018

If you need money but have no credit or bad credit, you may find it difficult to secure a personal loan. In that situation, you may want to consider either a co-applicant or cosigner as a way to increase your chances of a successful application. Although some people use the two terms interchangeably, a co-applicant and cosigner are technically different.

A personal loan is just a loan from a private lender that can be used for a variety of reasons including medical bill expenses, car repairs, home improvement, debt consolidation, vacation, and more. In many cases, lenders do not require collateral because many personal loan lenders deal with unsecured personal loans.

While no collateral is required, an unsecured loan application still poses some challenges. For instance, to qualify for an unsecured personal loan, you must have good credit, or you must appear low-risk and trustworthy in the lenders eyes. It is for those who are deemed un-creditworthy who are in need of a personal loan that may want to obtain the help of a cosigner or co-applicant.

What is a Co-Applicant or Co-Signer?

Before you reach out to someone to help you secure a personal loan, you should know the difference between a co-applicant and co-signer.

A co-applicant, which is also called a co-borrower, is an equal partner in the loan transaction or on the account. In other words, you and your co-applicant have the same responsibilities and rights when it comes to your personal loan. Equal rights to the loan means the co-applicant has equal authority to utlize the funds from the loan, but they also share the responsibility of paying back the loan.

The other option is to consider a cosigner. If you have no or bad credit as an applicant, you can rely on the credit history of a cosigner. Just like a co-applicant, applying for a personal loan with a cosigner can likely increase your chances of receiving one, if they have good credit. However, a cosigner has no obligation to pay the loan unless the primary borrower falls into default. Additionally, a cosigner does not have access to the funds in the way that a co-applicant does.

Cosigners are commonly used for personal loans and other products such as private student loans. Most often, using a co-applicant is a strategy used to take out a mortgage as opposed to taking out a personal loan, although you could still use one for a personal loan.

Lenders That Accept Cosigners and Co-Applicants

Only certain lenders allow applicants to add a cosigner or co-applicant. Lucky for you, we have already done the legwork by reviewing the top lenders in the industry and figuring out which allow for it. See our top choices below:

Best Cosigner Loans: Compare the Best Lenders

If you have less than ideal credit or no collateral to put down, it can be difficult to get a personal loan with a low interest rate. This is where cosigning a loan can really help.

With a low credit score (620 or lower), you stand to face some real reluctance, if not just flat out rejection, with many lending houses. Even if you are approved you stand to pay a high interest rate of 15% or higher. If you have a cosigner with good credit and stable income though, you can apply for a loan using the cosigner as an insurer of sorts for the loan, allowing you to attain a loan with conditions that are easier to keep up with.

Why Apply for a Personal Loan With a Co-Signer?

The main reason to pursue a personal loan with a cosigner is that you may be able to qualify for a loan that you wouldn't receive otherwise. If your cosigner has better credit than you and reliable income, then together you can qualify for a loan with a much friendlier interest rate that can really help your bottom line.

If you enter into a co-signed loan, you can repair your credit history and improve your score by paying off the loan. This can help you establish a positive credit history, and the co-signer can also build more good credit through the shared loan.

If you have other outstanding loans with high interest rates, a co-signed loan can allow you to take out a big enough amount of money to pay off your higher interest loans, bringing all of your debt under one lower interest rate.

The cosigner is on the hook for the loan so if you miss the payments they stand to take a serious hit to their credit rating. With a cosigned loan you increase the number of people at risk of financial harm if the loan is not paid on schedule.

If the cosigner’s credit isn’t much higher than yours, then the terms you get might not be good enough to offset the risk you’re asking the cosigner to undertake.

A hard credit history pull could potentially harm the co-signer's credit from the get-go.

Mixing family and business is. complicated. Typically a cosigner will be someone close to you - a parent, sibling, or even an in-law. This can be a rather uncomfortable cloud hanging over the relationship, and if you default, it could harm your personal relationship with the cosigner.

A $10,000 personal loan at 15% interest over 5 years will cost $237.90/month, and after 60 months you will have paid a total of $14,274 by end of term. The same loan with a cosigner, brought down to a friendlier 10% interest rate, will cost $212.47/month for a total of $12,748.20 by the end of the term.

Lenders That Accept Personal Loan Cosigners

A number of online lending companies provide cosigned loans, here’s a look at 5 of the main companies:

One of the biggest peer-to-peer companies in the industry, LendingClub​​ matches borrowers with a widerange of lenders, including those who provide cosigned loans. The loans you can find on LendingClub range from $1,000 to $40,000, with APRs starting as low as 5.99%. The cosigner only needs to have a credit score of 600 (“poor9rdquo; is 550-649) and the borrower only needs as high as 540.

The personal loan division of SunTrust Bank, LightStream​, is a good option for people looking for flexible loans ranging from $5,000 to $100,000. The company can provide loans within the same day, with APRs ranging from 2.49%-17.49%. And best of all, LightStream accepts joint applications for cosigned loans, as long as one of the applicants has excellent credit (750-850).

If you’re looking to consolidate your loans, FreedomPlus​​ has your number. The company was founded to help borrowers dig out of debt, and offers a wide range of personal loans from $10,000 to $35,000 with APRs from 4.99%-29.99%. FreedomPlus also provides personal loans for people with cosigners. Putting a co-signer with great credit on your loans can afford you a significant discount on your interest rate, dropping it down from 5-10%.

OneMain Financial​ prides itself on providing a personalized experience tailor-made for your needs, including with cosigned loans. The interest rates tend to be rather high, ranging from 18.49% to 35.99% for personal loans of $1,500 to $25,000. Borrowers with collateral can potentially take out loans for even higher.

CompareFirst​​ facilitates personal loans - cosigned and otherwise - ranging from $1,000 to $50,000 for terms of 12-60 months and a wide variety of interest rates. The company also has a simple, straightforward application process that should only take a few minutes, and a website that can walk you through any troubleshooting.

Bad credit can get you down, but by no means does it have to be a deal-breaker if you’re looking for a personal loan. With a cosigner in hand you can receive a personal loan that can help you consolidate debt or just give you a little more breathing room financially. So take a look around and find a lender with terms that work for you.

See our in-depth reviews of the top personal loan providers for more information.

Lenders That Accept Personal Loan Co-Signers

A co-sign loan may be an option for borrowers who don’t qualify for a loan on their own. Here are typical annual percentage rates for some lenders that let you apply with a co-signer.

Adding a co-signer’s credit history and income to a loan application can increase your chances of qualifying and get you more favorable terms. The co-signer acts as a form of insurance for the lender, promising to pay the loan amount if you default.

However, if you miss a payment, you risk hurting both your credit score and that of the co-signer. You can also ruin your relationship with the co-signer. Co-signers take on equal responsibility for the loan.

Co-signers are common with car loans or student loans, but some personal loan providers — banks, credit unions and a few online lenders — also allow co-signers.

Banks and credit unions that allow co-signers

Most major banks no longer offer personal loans, but Wells Fargo and Citibank still do. Both banks have the option of adding a co-signer. You need to be an existing customer to apply, and you must visit a Wells Fargo or Citibank branch to complete the paperwork for the loan.

Credit unions are a good first stop for any type of personal loan, because they have low interest rates and often work with borrowers to make a loan affordable, even if the borrower has bad credit. Most credit unions allow co-signers on unsecured loans (also called signature loans) and accept online applications. The maximum APR that federal credit unions can charge is 18%.

Online lenders that allow co-signers

A handful of online lenders let borrowers add a co-signer.

Lightstream: Loans for co-signers with excellent credit

LightStream, a lender with high credit standards, allows joint applications. The company looks at combined income and debt to check whether borrowers meet its underwriting requirements. But only one of the applicants needs to have excellent credit to qualify for a loan, according to Todd Nelson, LightStream’s business development officer.

•APR: 3.09% to 14.24% with AutoPay; 3.59% to 14.74% without AutoPay

•Loan amount: $5,000 - $100,000

•Loan terms: 2 to 7 years

•Minimum credit score: 660

•Time to funding: As soon as the same day

FreedomPlus: Rewards co-signers with good credit

FreedomPlus gives borrowers a lower interest rate if they add a co-signer with good credit. For example, if you initially qualify for a loan at 15.99% APR, adding a co-signer might discount that rate to 10.99%. Forty percent of FreedomPlus borrowers have co-signers, according to the company.

•APR: 4.99% - 29.99% fixed

•Loan amount: $10,000 - $35,000

•Loan terms: 2 to 5 years

•Minimum credit score: 640, but generally 700+

•Time to funding: As soon as 2 days

•Fees: Origination fee of 0% to 5% of loan amount; fees for late payment, unsuccessful payment and personal check use

Backed: Low rates for well-qualified co-signers

Backed ’s starting interest rates are among the lowest of online lenders, and it encourages millennial borrowers with thin credit to have a friend or family member “back” them on a personal loan. If your co-signer earns at least $50,000 and has a credit score of 720 or higher, Backed may be a good fit.

Backed currently operates only in Arizona, Arkansas, Florida, New Jersey, New York and West Virginia.

•Loan amount: $3,000 - $25,000

•Loan terms: 1 to 3 years

•Minimum credit score: 660 without co-signer, 720 for co-signer

•Time to funding: 2 to 4 business days

•Fees: Origination fee of 0.8% to 2.0% of loan amount. Fees for late payment, unsuccessful payment, personal check use

LendingClub: Peer-to-peer loans for joint borrowers

LendingClub, a large online lender, allows joint applications. The marketplace lender allows a maximum combined debt-to-income ratio of 35% for joint applications. One borrower must have a minimum score of 600 or above, while the second borrower can have a credit score as low as 540.

•APR: 5.99% - 35.89% (4.99% with excellent credit)

•Loan amount: $1,000 - $40,000

•Loan terms: 3 or 5 years

•Minimum credit score: 600, but borrowers average 699

•Time to funding: Usually 7 days

•Fees: Origination fee of 1% - 6% of loan amount; fees for late payment, unsuccessful payment and personal check use

OneMain Financial and Mariner Finance: Co-signer loans for bad credit

OneMain Financial makes loans to people with below average or bad credit and allows joint applications. OneMain has no minimum credit score requirement and offers same-day funding. You can start your application online, but to complete the process OneMain usually requires a visit to one of its more than 1,700 branches.

Mariner Finance has a low minimum credit score requirement of 600 and lets applicants use a co-signer to boost their approval odds. Mariner also considers applicants who have filed bankruptcy. Mariner has branches in more than 20 states and requires an in-person visit to complete the loan application process. (Its subsidiary, Pioneer Credit, has branches in eight states.)

• Loan amount: $1,500-$25,000

• Loan terms: 1 to 5 years

• Minimum credit score: None, but borrowers average 600 to 650

• Time to funding: Same day to up to three days

• Fees: Origination and late fees; both vary by state

Expediting Personal Loan Approval with a Cosigner

Expediting a personal loan approval is easy to achieve when you have a cosigner even if your credit score/history is not good. Especially if you manage to bring a co-signer who has excellent credit rate and credit history, getting a personal loan approval gets easier and quicker. You can reduce your interest rate and your repayment terms will be made easy because of the cosigner’s good credit. A parent, spouse of a close friend may be the cosigner.

A cosigner will be someone who will sign the loan along with you when you are applying for the required amount of loan. The cosigner will assume the responsibility to repay the loan in case you are not able to repay the loan. Getting a cosigner will help reduce the interest rate and the lender may agree for easier repayment terms. The cosigner should have a good credit rating because he/she is going to repay the loan in case you are defaulting repayment. So first inquire around and make sure of who will be your co-signer and whether their credit has good rating and credit history is good and they have reliable financial standing.

Check with your bank or any financial institution about the available options for loans with a cosigner. Some lenders or banks limit loan options when you bring in a cosigner. So get to know the terms and loan details offered. You need to find loans that will not require the cosigners to put up any collateral for the loans. Because of the co-signer’s better credit history, it should be easy to get an unsecured loan which does not need any upfront collateral deposit.

You have to have a steady income and you should be able to prove it as well with employment proof. In spite of the cosigner’s presence to expedite and assure you of the loan, the loaner/bank will need proof of your ability to repay the loan as it is to you they are advancing the loan. Once the proof of income shown and the credit rating and credit history of the cosigner is found to be good, the loan will be sanctioned. Get the loan amount credited into your account.

Having a cosigner not only helps you in getting the loan faster, it will give you an edge in negotiating better terms also. Based on the strength of the good credit rating of the cosigner, you can bargain for a lower interest rate with easier repayment options. The cosigner has the overall responsibility to repay even if the debtor has not defaulted; so the lender will comply with your request for better terms.

  • Take only minimum amount needed as loan.
  • Do not abuse the cosigner’s credit rate.
  • Try to repay as fast as you can.
  • Online lenders charge a higher interest and sometimes are unscrupulous; so check all options.
  • Take loan from a reputed lender/ bank, they are more reliable.
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