Top Co-Signer Personal Loan Providers
What is A Co-Signer Loan?
A co-signer loan involves a secondary borrower, often with a higher credit score, who commits to repay if the main borrower defaults. It offers increased approval chances and potentially better terms like lower interest rates, which are ideal for those with poor or no credit. These loans are versatile and suitable for expenses like car or home purchases, education, or debt consolidation.
Co-signer vs. Co-borrower?
A co-signer is not the same as a co-borrower. A co-signer can help you qualify for financing if you need it. Like the primary borrower, a co—borrower has full access to the loan’s funds. Both a co-signer and a co-borrower are responsible for repaying the loan, but a co-signer will only make payments if the borrower does not.
How Does a Co-Signer Loan Work?
A co-signer loan is like asking a friend with a good credit score to vouch for you when borrowing money. If you have trouble borrowing on your own due to a bad track record or no borrowing history, this co-signer steps in and promises the lender they'll pay if you can't. Your friend's good reputation gives the lender confidence, possibly leading to better borrowing terms for you. However, if you don't repay the loan, your friend will have to, which might hurt their good reputation. So, being responsible is crucial when someone is vouching for you.
Average Co-Signer Personal Loan Rates
The best co-signer loans will come with flexible repayment terms and a low APR (annual percentage rate). The rate depends on several factors, including the borrower’s and co-signer’s credit scores. Here are a few examples of reputable lenders and their joint loan offers:
*Rates and requirements are subject to change
Pros and Cons of Co-Signer Personal Loans
Top Co-Singer loan reviews
How to Get a Co-Signer Personal Loan
The process of getting a joint loan is similar to how you would get a typical personal loan. Some lenders have their own application process, but here’s a general overview of how to do it:
- Review your credit. Before applying for any financial product, checking your credit is important. Ask your co-signer to check their credit to ensure it’s high enough to help you qualify for a loan.
- Check the lender’s requirements. Most lenders require borrowers to meet certain credit score, income, and debt-to-income (DTI) ratio criteria. If your co-signer meets or exceeds these requirements, you could potentially get better terms or rates.
- Gather your documents. Both you and your co-signer will typically need to provide the same documents. This can include your driver’s licenses, Social Security numbers, paystubs, W-2s, and recent bank statements. It may also include contact information from both parties.
- Shop around for lenders. Not all lenders offer joint loans, so you may need to shop around to find those that do. It’s also a good idea to compare several lenders before choosing one. Compare their eligibility requirements, loan rates and terms, lender fees, and online reputation. Pick a lender with a competitive offer and minimal to no fees.
- Prequalify for a loan. Prequalifying lets you check your possible rates and terms without hurting your credit.
- Complete the loan application. After finding the best lender for your co-signer loan, fill out and submit the formal application. Your co-signer will either have to complete their own application or add their information along with yours.
- Wait for the decision. The lender will review both your and your co-signer’s information to determine whether to approve or deny your application. Depending on the lender, this can take anywhere from a day to a couple of weeks.
- Receive funds. Once approved, review and sign the loan agreement. You’ll then receive the funds in your bank account — sometimes within a few business days.
- Start making payments. Now that you have a joint loan, you’ll need to start making payments until it’s repaid in full.
Co-Signer Loans: What to Consider
Here are the top things to consider when looking for a co-signer personal loan loan:
- Co-signer requirements: Your co-signer should be someone with good money management habits and a history of making on-time payments. They should have good or great credit (670+), a steady income, and a low DTI ratio.
- Cost of the loan: A joint loan comes with its own interest rate and repayment term. Some lenders also charge additional fees, such as origination or prepayment fees. Use an online calculator to determine the total cost of the loan and calculate your estimated monthly payments. Choose a loan that you can comfortably afford to repay.
- Time to funding: Certain online lenders offer same-day or next-day funding options. This could be a good option if you need the cash quickly.
- Building credit: You may be able to build credit using a co-signer loan, but you’ll need to keep your credit utilization low and consistently make on-time payments.
Does Getting a Co-Signer Affect Your Credit?
Being a co-signer on might assist in establishing credit. The principal loan holder and co-signer share equal financial liability, and the loan will appear on both credit reports. However, your score could also be badly impacted if the primary account holder misses payments.
Indeed, co-signers are expected to make payments if the primary account holder fails to do so – Your credit score might decrease if the recipient makes late or no payments. In addition, while having many credit lines may help you appear favorable to potential lenders, it only accounts for a minor portion of your credit score. Typically, this is only beneficial if you have demonstrated that you can manage many lines of credit over an extended period by making payments on schedule and keeping balances low.
On a final note, your debt would rise as the debt of the consignee would be shown on your credit record. This increase in the debt you owe will be reflected in the relevant section of your credit report.
Alternatives to Co-Signer Loans
If a co-signer loan isn’t right for you, here are a couple of alternatives to consider:
- Improve your credit score: By checking for errors on your credit reports and disputing them, making on-time payments, reducing your debt, and using a secured credit card or credit-builder loan to gradually raise your score. This will help build a stronger credit foundation for your financial goals.
- Use a secured personal loan: These loans are secured with an asset or collateral, like a paid-off vehicle or house. If you default on payments, the lender can take the asset instead. This makes them less risky to the lender than unsecured loans. These loans also tend to have more lenient requirements.
- Get a low-interest credit card:A credit card could be useful if you need to consolidate debt, pay for emergencies, or purchase a big-ticket item. You may need good credit to qualify for a competitive interest rate or higher credit limit.
- Use a loan from your retirement account: If you have a retirement account, you may be able to take out a loan to cover emergencies or other expenses. For example, some 401(k) plans offer 401(k) loans. These loans can be used for almost anything. In the case of a 401(k) loan, you can only borrow up to 50% of your account balance or $50,000 (whichever is less). Depending on the retirement account, you could be facing an early withdrawal penalty or have to pay taxes on the borrowed amount.