unsecured personal loans with cosigner

unsecured personal loans with cosigner

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.

Personal Loans With a Cosigner: Getting a Joint Personal Loan

November 20th, 2017

A personal loan is an unsecured loan you can use for a range of purposes — from consolidating debt or paying for a wedding to funding emergency repairs on your vehicle or any other number of life situations where you need a large chunk of money quickly.

Personal loans are doled out as a lump sum and typically come with fixed monthly payments. You then spend the term of your loan paying off the balance and interest.

You may be able to qualify for a personal loan even if your credit isn’t excellent, but you’ll qualify for better terms with a better score. Some people may choose to bring on a cosigner for a personal loan to improve their chances of getting approved.

Your cosigner may have stronger credit and/or a better income than you do, which may help you qualify for better loan terms or even to get approved in the first place.

There are good reasons to take out a personal loan with a cosigner, but there are some negatives to consider, too.

  • You may qualify for approval if your credit score or income would normally disqualify you.
  • You may get more favorable loan terms if your cosigner has a better credit history or higher income than you do.
  • Any missed or late payments won’t just affect you; they’ll affect your cosigner’s credit report, too.
  • If you damage your cosigner’s credit, there’s a strong chance that your personal relationship will suffer.
  • It can be difficult to have your cosigner removed from the loan.

If you cosign a loan, you will be held responsible for payments should the primary borrower fail to fulfill his or her financial obligation.

Nishith Krishna, director of student and personal loans at PenFed Credit Union , says that while some lenders allow for the removal of the cosigner from the loan after a set period of time, what he sees more often is the primary borrower refinancing the loan, removing the cosigner from any further obligation in the process.

Coborrowing is less common with personal loans and is treated differently than cosigning. In these arrangements, two parties have an equal stake in the money being borrowed — like a couple taking out a mortgage. The two parties will in all likelihood qualify for a higher mortgage limit than either one could individually. Business partners also frequently coborrow.

You typically cannot be removed from a loan as a coborrower. If you want to get out of the loan, the other party will have to agree to refinance in his or her name only.

In the event of a death, a cosigner’s or coborrower’s estate is typically accountable should the other party struggle. You may be able to dodge this requirement if your contract does not have a successor clause for cosigners, or if your state allows refinancing by the surviving party after the death of one coborrower.

How a cosigner can help you get approved for a personal loan

If you have less-than-perfect credit, or if you have a thin credit file simply because you are young, a cosigner with a stronger credit score can help you qualify for your personal loan. Because that person has demonstrated responsibility with credit or has an income sufficient to make payments if you fail to do so, your lender knows your cosigner’s likely to come through should you fail to make on-time payments.

Sometimes a strong credit score isn’t enough to qualify for a personal loan. If you have a low income or no steady wage, lenders may consider you unable to repay your loan. If someone with a higher income is able to cosign your personal loan, your odds of approval may improve.

You may have enough income to qualify with a decent credit report, but you may not be offered the interest rate you were hoping for. In these situations, a cosigner might help. His/her income and credit history might help you qualify for a lower rate, saving you money over the course of your loan.

How to get the best rate on a personal loan

Whether or not you use a cosigner, there are several things you can do to increase your credit score and thereby qualify for better rates on your loan.

Lower your debt-to-income ratio (DTI)

An important part of your credit score is your DTI . This ratio measures how much collective money you owe to lenders against the amount of money you bring in. The higher the ratio, the harder it may be for you to manage your monthly loan payments.

There are two things you can do to lower this ratio and qualify for better rates. First, make a concentrated effort to pay down your debt. Second, do what you can to increase your income.

While both measures will help you increase your overall financial health, paying off your debt is usually the best one to tackle first. You may not be able to control getting a promotion at work or securing a move with a higher salary, but you can budget and make debt a priority.

Decrease your credit utilization

The higher your credit utilization , the more likely it is to negatively impact your score.

Typically, it’s suggested to have a utilization rate no greater than 30 percent. That means you’re not using more than 30 percent of your total available credit.

Let’s say you have three credit cards with a combined credit limit of $10,000. Your goal should be to never carry a balance of more than $3,000 across those cards at a given moment, because that will drive your utilization rate above that threshold. Utilization rate has a big impact on your credit score, and the lower it is, the better off your score will be.

To lower your utilization rate, you can pay down debts or consider requesting a credit limit increase, although that can potentially ding your score .

Make on-time payments

Late payments can severely hinder your credit, as this is the single largest factor used in computing your credit score.

To preserve your credit score, make sure you are paying all of your bills on time every month. While it’s best to pay off any credit cards in full every month, be sure to make at least the minimum payment.

Compare loan terms to get the best rate

Loan terms can greatly impact the rate you are offered. For example, some lenders will offer you an interest rate decrease simply for setting up automatic payments.

Another instance where you may see lower rates is if you choose a longer loan term. Be careful, though. Paying a lower rate over a longer term can still end up costing you more in interest than paying a higher rate for a shorter period of time.

Use LendingTree’s personal loan tool to potentially compare several loan offers at once.

It’s important to note that comparing APR rather than interest rates is important when you’re taking out a personal loan. Almost all personal loans come with an origination fee, but some will advertise this fee separately from the interest rate. The APR factors in such fees, allowing you to get a better idea of who is actually offering you the best deal.

Be sure to compare rates across lenders while remaining mindful of how loan terms may be affecting interest rate offers. You may even be offered multiple different rates by the same lender. This happens when a single lender offers you multiple loans with differing terms.

Even if you’re offered good terms, you should flag any loan offers that include these line items:

Finding a cosinger and responsible borrowing

Cosigning on a loan can be risky business. The cosigner presumably has a good credit score and decent income, and thus doesn’t have much to gain from cosigning, even if the primary borrower is responsible. That person, however, have a lot to lose should the borrower fail to meet all financial obligations.

Because of the inherent risks for a cosigner, it may be difficult for a borrower to find a willing party. While you can ask anyone close to you, younger people tend to ask a parent or other close family member. Krishna notes that most of the applications he sees are not from younger people, though, and you should turn to another specific family member to cosign if possible.

“We do care whether you have a spouse or nonspouse cosigner,” he says. “Spouse cosigners are viewed more favorably.”

Before you broach the subject with your potential cosigner, come prepared. Know the terms of your loan offer, and figure out how you would meet them if you successfully found a cosigner. Then, present the offer to the person you hope will sign, along with your payoff plan. Stress that you understand the gravity of the request, and provide some assurance that you’ll meet your responsibilities. Tell the person you won’t let him/her down.

Then, make sure you don’t. Make on-time payments each and every month. By doing so, you are likely to strengthen your own credit history — especially if you’re attempting to establish one from scratch.

After a few years of on-time payments, your score may be strong enough to release the cosigner.

Can I remove my cosigner from the loan in the future?

Cosigner release is not as common in the world of personal loans as it is in student loans. You can still relieve your cosigner of their duties, though, if you qualify for a new personal loan on your own and then refinance.

To improve your financial situation to a point where you qualify solo so you can release your cosigner from their obligations, make on-time payments every month. Don’t just do this for your personal loan; do it for all of your other bills and debts, too.

Work to reduce your DTI and simultaneously lower your credit utilization. Make increasing your income a primary goal, whether that be through a promotion at your primary job or by taking on a consistent and reliable side hustle.

It’s hard work, but the reward of maintaining a healthy personal relationship with your cosigner post-loan is worth it.

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

I have terrible credit for a variety of reasons that I am trying to resolve. This question isn't directly about my bad credit.

posted by Sunburnt at 7:32 PM on September 26, 2013

posted by quince at 8:15 PM on September 26, 2013 [6 favorites]

posted by Inspector.Gadget at 8:53 PM on September 26, 2013

posted by Hatashran at 9:02 PM on September 26, 2013

posted by Justinian at 11:07 PM on September 26, 2013

posted by Dansaman at 12:42 AM on September 27, 2013

posted by h00py at 6:17 AM on September 27, 2013 [1 favorite]

$7,000 per year to just stay where you are.

posted by tckma at 12:05 PM on September 27, 2013

posted by parakeetdog at 1:24 PM on September 27, 2013

posted by getawaysticks at 11:26 AM on September 30, 2013

An unsecured loan is a loan that is issued and supported only by the borrower's creditworthiness, rather than by any type of collateral. Because unsecured loans, sometimes referred to as signature loans or personal loans, are obtained without the use of property as collateral, the terms of such loans, including approval and receipt, are most often contingent on the borrower's credit score. Borrowers must generally have high credit ratings to be approved for certain unsecured loans.

An unsecured loan stands in direct contrast to a secured loan, in which a borrower pledges some type of asset as collateral for the loan, in turn increasing the lender's "security" for providing the loan. Unsecured loans are bigger risks for lenders, and as a result, they typically have higher interest rates and require higher credit scores than secured loans such as mortgages or car loans. In some instances, lenders will allow loan applicants with insufficient credit to provide a cosigner, who can take on the legal obligation to fulfill a debt should the borrower default.

What Are Examples of Unsecured Loans?

Unsecured loans include credit cards, student loans and personal loans, all of which can be revolving or term loans. A revolving loan is a loan that has a credit limit that can be spent, repaid and spent again. Examples of revolving unsecured loans include credit cards and personal lines of credit.

Term loans, in contrast, are loans that the borrower repays in equal installments until the loan is paid off at the end of its term. While these types of loans are often affiliated with secured loans such as mortgages and car loans, there are also unsecured term loans. A consolidation loan to pay off credit cards or a signature loan from a bank would be considered unsecured term loans.

There's ample data to suggest that the modernizing unsecured loan market is growing. In a November 2017 consumer credit report, TransUnion estimated that credit card balances in the United States had risen 7% in the third quarter of 2017 to $731 billion while personal loan balances reached an all-time of $112 billion. The past decade has seen the rise of peer-to-peer lending via online and mobile lenders coinciding with a sharp increase in unsecured loans. In another report, TransUnion found that "fintechs," or financial technology firms, accounted for 32% of personal loan balances through the first half of 2017, up from just 4% in 2012.

Alternative Lenders and Unsecured Loans

Alternative lenders, such as payday lenders or companies who offer merchant cash advances, do not offer secured loans in the traditional sense of the phrase. Their loans are not secured by tangible collateral as mortgages and car loans are. However, these lenders take other measures to secure repayment.

In particular, payday lenders have borrowers give them a postdated check or agree to an automatic withdrawal from their checking accounts to repay the loan. Many online merchant cash advance lenders require the borrower to pay a certain percentage of online sales through a payment processing service such as PayPal. As a result, these loans are considered unsecured; although they are partially secured.

Defaulting on an Unsecured Loan

If a borrower defaults on a secured loan, the lender can repossess the collateral to recoup his losses. In contrast, if a borrower defaults on an unsecured loan, the lender cannot claim property. However, the lender can take other actions, such as commissioning a collection agency to collect the debt or taking the borrower to court. If the court rules in the lender's favor, the borrower's wages may be garnished, a lien may be placed on the borrower's home, or the borrower may be otherwise ordered to pay the debt.

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