Best Personal Loans With a Cosigner in December 2024

If you can't get approved for a personal loan because of spotty credit or limited income, you might want to get a cosigner. A cosigner is someone who agrees to pay back the loan if you can't. As long as they have good credit and steady income, lenders may be more willing to approve your loan, give you a better interest rate, or let you borrow a larger amount. But only a few lenders allow cosigners, including the ones below.

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Best personal loans with a cosigner

There aren't a lot of lenders that let you apply with a cosigner. Here are two highly-rated providers that do. Bear in mind that the cosigner is also responsible for the loan which means they'll have to pay if you miss payments or default, and their credit would suffer. Even late payments could negatively impact their credit.

Methodology

Credible focused its search for this list to lenders that allow cosigners on personal loans. Also taken into account in rankings were maximum APRs, minimum credit score and income requirements, available loan amounts, terms offered, fees, discounts, and more. Credible's team of experts gathered information from each lender's website, customer service department, directly from our partners, and via email support. Each data point was verified by a third party to make sure it was accurate and up to date.

Learn more about how Credible rates lenders by exploring our personal loans lender rating methodology.

How to compare personal loans with a cosigner

As you shop around for lenders that offer personal loans, consider the following factors:

• Cosigner option: Not all lenders allow cosigners, so check before you apply. Additionally, some lenders may allow co-borrowers and not cosigners. A co-borrower with good credit may also help you qualify for a loan. But, unlike a cosigner, the co-borrower has equal access to loan funds.
• Annual percentage rate (APR): The APR tells you how much it will cost to borrow money on an annual basis. It's a better way to see the total cost of the loan than comparing interest rates because it accounts for upfront fees, like origination or administrative fees.
• Loan amounts: Lenders vary in the loan amounts they offer. Look for those that best suit your situation and the expense(s) you want to cover. Personal loan amounts can range from $600 to more than $100,000
• Repayment terms: The amount of time you're given to repay the loan can also vary. Longer loan terms lower your monthly payment amount but increase your overall cost due to more interest. You can typically find repayment terms from 1 to 7 years, but some lenders offer longer terms for loan purposes like home improvement or buying an RV
• Fees: Some lenders charge origination fees, depending on the lender and your credit profile. Take note of the fee amount, or lack thereof, on each loan.
• Overall cost: Use a personal loan calculator to see the total cost of a loan based on its interest rate, the loan amount, and the repayment term.
• Time to fund: Funding times vary. Check the average amount of time a lender takes to approve applications and deliver funds. Most lenders can fund in about a week or less, some even as soon as the same day or the next business day.

Lenders often provide most, if not all, of the above information when you prequalify online. The rest can usually be found in their FAQ sections, by running some numbers, or by contacting a customer support representative.

Prequalification is a way to get loan quotes without impacting your credit. It only takes a few minutes and is a great way to compare APRs and terms, but it's not an offer of credit. Your rate could change once you formally apply. Once you apply, the lender will conduct a hard credit pull, which could temporarily ding your score.

To find the best deal, collect quotes from a handful of companies — with and without a cosigner — and compare them side by side. Look for a lender that offers the loan amount, monthly payment, and funding time you want at a competitive overall price.

How much money can you save with a cosigner?

The amount a cosigner can help you save will depend on the loan rates and terms you qualify for by yourself and with them.

For example, if a lender offers you a five-year, $10,000 personal loan with a 20% APR and an 8% origination fee, you would receive $9,200 upfront (because origination fees are generally subtracted from your loan amount).

The origination fee and overall interest would amount to $6,696 over the term of the loan. If you apply with a cosigner, however, and get a 10% APR and 2% origination fee on this five-year loan, it would only cost $2,948. In this case, a cosigner could save you $3,748 over the course of the loan.

What is a cosigner?

A cosigner is someone who agrees to take responsibility for a borrower's debt if the borrower doesn't pay in full. Since they're not the primary borrower, or even a co-borrower, they don't have access to the loan funds. For example, if someone cosigns a loan to purchase property, they won't receive ownership or other rights to that property.

If the primary borrower misses payments, the cosigner must step in and make the payments instead. They may also have to pay any late or collection fees that apply. The missed or late payment could also show up on the cosigner's credit report.

If the primary borrower stops paying altogether — defaulting — the cosigner assumes equal responsibility for the loan. If a loan ends up in collections, debt collectors could pursue payment from both the primary borrower and the cosigner.

It's possible to cosign for different types of loans, including personal loans, auto loans, and student loans. As long as they have good credit and income, the cosigner could help the main borrower get a lower interest rate, better repayment terms, or a higher loan amount.

What are cosigner loans and how do they work?

A cosigner loan works similarly to any other personal installment loan. You'll need to find a lender that meets your needs and apply for financing. You'll also need to meet any borrowing criteria, like a minimum credit score or income. Some loans, called secured loans, also require collateral.

If approved for a loan with a cosigner, you'll receive the full amount (excluding any origination fee) upfront in a lump sum payment. You can then use the funds for the loan purpose you indicated in your application. You'll also have to start making monthly payments on that loan.

Note that the cosigner won't have access to the loan funds. But by cosigning for the loan, they are assuming responsibility for it. If you can't make payments, they'll have to step in.

Cosigner loans come with a document referred to as a notice to cosigner. This document details the cosigner's responsibility and what happens if the primary borrower fails to pay what they owe.

Cosigner vs. co-borrower

Some lenders allow co-borrowers, but not cosigners. While the terms may sound similar, they're actually quite different. Here's what to know:

• Cosigner: This is someone who agrees to make loan payments if the primary borrower doesn't. The cosigner doesn't have direct access to the funds, but they can help the borrower get approved for a loan — potentially with better terms or rates. If the borrower keeps up with payments, the cosigner won't have to do anything. If both the borrower and cosigner fall behind on payments, both parties' credit scores could be damaged.
• Co-borrower: A co-borrower is someone who applies for a loan with the primary borrower. For example, domestic partners or a married couple might get a mortgage together as co-borrowers. Both parties have access to the loan funds and are responsible for repayment.

If you're applying for a loan with either a cosigner or a co-borrower, be prepared to provide their information. Lenders typically require everyone's income, assets, and credit profile as part of the approval process.

Average rates on cosigned personal loans

The average interest rate on a personal loan depends on factors like credit score, repayment term, and lender. If you get a cosigner, you're likely to get better rates than you would when applying on your own. The cosigner will need to be financially stable and meet — or exceed — the lender's other criteria, however.

Keeping that in mind, these are the typical rates for three- and five-year personal loans (without a cosigner).

What are the risks of using a cosigner?

A cosigner with excellent credit and income could help you get better rates and terms, or even a higher loan amount, which could save you a considerable amount of money over time. That said, there are a few risks to using a cosigner — mostly for the cosigner themselves:

• If the borrower defaults, the cosigner could end up responsible for the entire loan.
• Any late or missed payments could impact the cosigner's credit score.
• The additional loan could make it harder for the cosigner to qualify for financing.
• A lender could attempt to sue the cosigner instead of the borrower, which could lead to wage garnishment, damaged credit, or other financial challenges.
• There's always the risk of friction between both parties, particularly if the borrower can't make payments.

Be aware that as the borrower, you'll still be responsible for loan repayment. Missed or late payments could affect your credit score and result in additional fees. If you default on payments, your lender could also send the account to collections. The lender — or debt collector — could also file a lawsuit against you.

If you miss payments, it could also strain your relationship with your cosigner. If you run into trouble and realize you're not going to be able to make a payment, notify the lender and your cosigner as soon as possible. This will give you more time to iron out a plan and avoid any penalties — like late fees or damaged credit.

Alternatives to cosigned personal loans

If you decide a cosigned personal loan isn't right for you, you can explore a few alternatives:

• Home equity loan: With a home equity loan, you can borrow against the equity in your home — usually up to 80% of the equity you've built. You get the money upfront and can use it for things like home renovations or emergencies. You must repay it — plus interest — over a period of months or years. Since it's secured by your property, failure to repay what you owe could mean losing your home.
• Home equity line of credit (HELOC): A HELOC also involves borrowing against your home equity, but it works like a credit card instead of a loan. You borrow and repay as you go.
• Cash-out refinance: With this, you take out a new mortgage that's larger than your current one. You'll receive the difference in a lump-sum payment, which you can use for things like debt repayment or home improvements. Similar to your original mortgage, the new loan will have its own terms and interest rate. You'll need to make monthly payments until it's paid off.
• 401(k) loan: A 401(k) loan lets you borrow money — up to $50,000 or half of your vested balance, whichever is less — from an existing 401(k) retirement account. Not all 401(k) plans allow loans, so check your plan's rules before pursuing this route. Note that if you lose your job or if the plan is terminated while you have the loan, you may be required to pay back the outstanding balance at once.
• Credit card: A credit card is a revolving line of credit you can use on an as-needed basis (up to a certain limit). You'll be charged interest on the amount used. APRs can be high — 21.76% on average, according to the Federal Reserve — but you can avoid interest by paying off the full balance each month. With good credit, you could also qualify for a 0% introductory APR card.
• Peer-to-peer (P2P) loan: A P2P loan is an alternative loan you can use for nearly anything — similar to personal loans. You'll need to find a P2P lending platform that will connect you to individual investors. Each investor sets their own terms, rates, and eligibility criteria. P2P loans may be easier to get than bank loans. However, not all platforms are reputable so do your due diligence.

Read More:

• Best Personal Loans for Good Credit
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• Best Personal Loans for Fair Credit
• Best Banks for Personal Loans
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