Looking for a personal loan, but tired of high interest rates and expensive fees? Unless your credit score is above 720 and you have a lengthy credit history, you won’t qualify for the best rates and terms. However, there is another way. Applying for personal loans with a cosigner can help you qualify for larger amounts with better rates and terms.
You can qualify for prime rates and terms if you have a friend or relative with excellent credit who is willing to cosign your personal loan. The problem is not many lenders accept cosigners. Here are the few lenders that do
What is a cosigner?
A cosigner is someone, usually a close friend or family member, who promises to pay for a loan if the main borrower doesn’t. cosigners are beneficial for both the lender and the borrower. Lenders love cosigners because they reduce the risk of a loan default. Borrowers benefit because they can qualify for lower interest rates and more affordable fees.
What is the difference between a cosigner and a co-borrower?
Both cosigners and co-borrowers share responsibility for paying the loan. However, co-borrowers (also known as joint applicants) also receive a share of the money from the loan.
Cosigners do not receive any money from the loan and are only required to make payments if the main borrower defaults. A joint applicant or co-borrower, on the other hand, usually shares the responsibility of paying the loan from the beginning.
The difference between a cosigner and a co-borrower is particularly important with secured loans, such as mortgages and auto loans. In such cases, a co-borrower appears on the property’s title and shares ownership of the security. In the case of personal loans, there is no property to secure the loan.
Personal Loans for Poor and Fair Credit
|Lending Partner||Minimum FICO Score||APR Range|
|No Min||36% - 299%*||Apply|
|No minimum||36% - 199%*||Apply|
|600||15.49% - 34.99%*||Apply|
|600||5.99% - 35.89%*||Apply|
|No Min||35% - 155%*||Apply|
|580||9.95% - 35.99%*||Apply|
Best online lenders that offer personal loans with a cosigner
Although commonplace with mortgages, auto loans, and student loans, only a few online lenders accept cosigners for unsecured personal loans.
Here are three online lenders that accept personal loan cosigners. Of course, only cosigners with excellent credit and a long credit history will allow you to qualify for the lowest rates. Note that even if your cosigner has amazing credit, you may not qualify for the best rates because borrowers still take into account your credit history and debt-to-income ratio.
Lenders Accepting Co-Signers
|Lending Partner||Minimum FICO||APR Range|
|600||5.99% - 35.96%*||Apply|
|600||7.93% - 29.9%*|
Things to consider before cosigning a loan
Personal loans with a cosigner are good for the borrower but not necessarily for the cosigner. Cosigning a loan is not something you should take lightly, whether you’re the borrower or the cosigner. You have more to lose than money and your credit score. Sometimes, close friendships and family ties become collateral damage when a cosigned loan goes bad. Here are some things to consider.
Cosigning a loan is risky business
According to a 2016 report, 38% of cosigners had to repay the loans they guaranteed. Those are scary odds that should give you pause. It doesn’t mean you should never cosign a loan, but you do need to weigh the costs. Only cosign loans you can afford to pay if the borrower stops making payments because there’s a good chance you will.
Negotiate the terms
As cosigner, you can negotiate the terms of your liability with the creditor. For example, the Federal Trade Commission recommends cosigners include a clause that limits liability to the principal of the loan. You could ask the lender to add a clause like this to the loan agreement: “The cosigner will be responsible only for the principal balance on this loan at the time of default.”
Cosigning a loan will affect your credit score
Lenders consider loans you cosign as debt. This will increase your debt-to-income ratio, which determines 30% of your credit score (Source).
Source – FICO
Request monthly statements
Cosigners have the right to receive monthly statements for the loans they guarantee. If you cosign a loan, ask the lender to send you monthly statements. The statements will alert you to any missed payments that could further damage your credit score.
How to get personal loans without a cosigner
Even without a cosigner, borrowers with poor credit can get a loan. The rates will be higher than you want, but, on the bright side, paying off a loan can help improve your credit if you don’t miss any payments.
Of course, there are cheaper ways to improve you credit that getting a personal loan. If you don’t need money straight away, consider getting a credit building account with SelfLender. For a small fee, SelfLender will report monthly deposits in your account as loan payments to all three credit bureaus (Equifax, Experian, and TransUnion), which – if you don’t miss any deposits – can improve your credit score.
If you need the money now, there are several online lenders that offer loans to people with bad credit and limited credit histories. SuperMoney’s personal loans database allows you to filter lenders based on the features that matter to you.
Here are our top lenders for people with bad credit.