Common Questions About Personal Loans with a Cosigner

What is a cosigner (guarantor) on a personal loan?

A cosigner is someone who helps you qualify for a loan by promising to pay back the debt if you can't. They sign on the loan and legally share responsibility for it. For a cosigner to be able to help you get approved, they should have established credit that is considered "good" or better.

What is the difference between a cosigner and a co-applicant on a personal loan?

A co-applicant or co-borrower is someone who applies for a personal loan with you to secure funds for a shared purpose, such as opening a business. These types of applications are also known as joint loans. Co-borrowers typically assist with monthly loan payments and have a say in how the money is spent. Cosigners, on the other hand, don't usually need the loan themselves and don't have access to the funds. They guarantee the loan and take legal responsibility for the debt solely to increase your chances of getting approved and qualify for better rates.

Is there a difference between a cosigner and a guarantor?

Both cosigners and guarantors can help you qualify for loans if you don't have good credit. While used interchangeably at times, they do have slightly different meanings. A cosigner is immediately liable for your debt if you miss payments. Your lender can try to collect payment from your cosigner as soon as you start to fall behind on the loan. Guarantors, however, are typically treated as a last resort and are only asked for payment later in the debt collection process.

How does getting a personal loan with a cosigner work?

If you don't already have a cosigner lined up, you should ask family and friends (who are in a good place financially) if they'd be willing to guarantee your loan. Once you've secured a cosigner, you'll need to shop around to find a lender that allows cosigners and that will offer you the best overall value. The list above is an excellent place to start and if you need more information, then check out our article on how to get personal loans with a co-signer. Then, you and your cosigner will need to gather up your financial documents, such as tax returns and pay stubs, and apply for the loan together. You'll usually find out within a few days whether or not you've been approved.

How do I know if I need a cosigner for a personal loan?

Many lenders require borrowers to have good or excellent credit to be approved for a personal loan. If your credit score falls below that threshold, you may need a cosigner to improve your chances. You might also need a cosigner if you have a thin credit file, a high debt burden, or inconsistent income, as these factors can cause lenders to see you as a high risk.

What are the pros and cons of applying for a personal loan with a cosigner (guarantor)?

Applying with a cosigner can help you get approved for personal loans even if you have bad credit or inconsistent income. It can also help you qualify you for better interest rates than you would get on your own.

But guaranteeing a loan is risky, so you may have trouble finding someone who will agree to do it. If you can't pay back your debt, your cosigner will have to step in and make the payments. Their credit score may also take a hit if you miss payments or pay late.

Cosigning is a big responsibility for both parties, so it shouldn't be taken lightly. However, as long as you keep up with your payments, it can help you get the loan you need at a lower price. Further, it can help you get closer to qualifying independently down the road.

What banks offer personal loans with a cosigner?

There aren't many major banks that still offer personal loans and accept cosigners, but some, such as PNC and Truist, still do. It is usually easier to get a personal loan with a cosigner from smaller banks, credit unions, and online direct lenders. The list above is a great starting point.