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If you need a personal loan but worry that your credit file is too thin or your score is too low to qualify for a great interest rate on your own, a cosigner may be the answer. Here, we'll tell you everything you need to know about taking out a personal loan with a cosigner, including the role a cosigner plays, how to ask someone to cosign a personal loan, the risk a cosigner takes, and alternatives to consider.
A cosigner is someone who agrees to take responsibility for personal loan payments if you fail to make them as agreed. There are several reasons you may need a cosigner:
When you take out a personal loan, the lender must take your word that you will make the monthly payment until the loan is repaid in full. If you have a long, positive credit history and good credit score, it's easier for a lender to believe that you will make your monthly payments. If you have poor credit, a short credit history, or negative remarks on your credit report (even if they're in the past), offering you an unsecured personal loan makes lenders nervous.
A cosigner with good credit helps lenders feel more secure about making the loan. That's because if you miss a payment, the cosigner is expected to make the payment. If you walk away from an unsecured personal loan, the cosigner is on the hook for getting it paid.
The best personal loans using a cosigner might be found at your local brick-and-mortar bank or credit union -- or with an online lender. Not all lenders allow for a cosigner, so your first step is to check with several to find out which will let you fill out a loan application with a cosigner.
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If you have low or no credit, cosigner can help you qualify for a personal loan. But not every lender accepts cosigners. Get started by contacting the best personal loan lenders to find out which ones will welcome an application with a cosigner.
Get the best rates and terms to fit your needs. Here are a few loans we'd like to highlight, including our award winners.
Here are a few important things to know about cosigned loans before you sign up for one.
You're probably nervous about asking someone to cosign a loan, but remember this: Most adults have been in your position at some point. We all start out with a thin (or non-existent) credit score and many of us have needed help getting started. Here are a few pointers for asking someone to be your cosigner:
Even if you have poor credit, a cosigner is not your only solution. Here are some options to consider.
Some lenders specialize in providing personal loans with no credit. This loan will come with a higher interest rate than other personal loans. Still, getting a personal loan for zero-credit borrowers allows you to be the only person on the loan application. You'll increase your credit history and credit score as you pay off the loan, too.
If bad credit is standing in the way of you and an unsecured loan, try applying to the best personal loans for bad credit.
Yes, the personal loan interest rate will be higher than you might hope, but you can use this loan to reform your credit history and raise your all-important credit score.
There are two types of personal loans: a secured loan and an unsecured loan. To this point, we've discussed unsecured personal loans -- the type that requires only your signature. A secured loan is different.
With a secured loan, you put something of value up as collateral. If you miss payments, the lender can take possession of and sell this item. Your collateral could be anything of value, like a savings account, a retirement account, a vehicle, fine jewelry, art, or land.
Not every lender is equipped to make a secured personal loan (most online lenders do not), but it's worth calling around to find a lender who does deal with secured personal loans.
Personal loans can make life easier. Whether you need to cover debt consolidation, make auto repairs, switch from a variable rate to a fixed-rate loan, or get rid of payday loans with sky-high interest rates, a personal loan can make it happen.
Here are some other questions we've answered:
We've run the numbers and read through the fine print to find the loan options with competitive rates and low-to-no origination fees. Learn more about our top picks by clicking below.
Typically, a cosigner is someone with a strong credit score who agrees to guarantee your loan if you fail to make payments.
Above 670 is generally considered "good credit" -- the credit score needed by a cosigner varies by lender. However, the higher the cosigner's credit score, the better the interest rate will likely be.
Carefully. Explain why you need a cosigner, and offer to provide proof of payment after each monthly payment is sent in.
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We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent, a Motley Fool service, does not cover all offers on the market. The Ascent has a dedicated team of editors and analysts focused on personal finance, and they follow the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent, a Motley Fool service, does not cover all offers on the market. The Ascent has a dedicated team of editors and analysts focused on personal finance, and they follow the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands.
*SoFi Personal Loan Disclaimer
Fixed rates from 8.99% APR to 29.99% APR reflect the 0.25% autopay interest rate discount and a 0.25% direct deposit interest rate discount. SoFi rate ranges are current as of 02/06/2024 and are subject to change without notice. The average of SoFi Personal Loans funded in 2022 was around $30K. Not all applicants qualify for the lowest rate. Lowest rates reserved for the most creditworthy borrowers. Your actual rate will be within the range of rates listed and will depend on the term you select, evaluation of your creditworthiness, income, and a variety of other factors.
Loan amounts range from $5,000–$100,000. The APR is the cost of credit as a yearly rate and reflects both your interest rate and an origination fee of 0%-7%, which will be deducted from any loan proceeds you receive.
Autopay: The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Autopay is not required to receive a loan from SoFi.
Direct Deposit Discount: To be eligible to potentially receive an additional (0.25%) interest rate reduction for setting up direct deposit with a SoFi Checking and Savings account offered by SoFi Bank, N.A. or eligible cash management account offered by SoFi Securities, LLC (“Direct Deposit Account”), you must have an open Direct Deposit Account within 30 days of the funding of your Loan. Once eligible, you will receive this discount during periods in which you have enabled payroll direct deposits of at least $1,000/month to a Direct Deposit Account in accordance with SoFi’s reasonable procedures and requirements to be determined at SoFi’s sole discretion. This discount will be lost during periods in which SoFi determines you have turned off direct deposits to your Direct Deposit Account. You are not required to enroll in direct deposits to receive a Loan.
Impact to credit score: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Citi Personal Loan disclaimer:
**Rates as of 05-31-2024. Your APR may be as low as 11.49% or as high as 20.49% for the term of your loan. The lowest rate quoted assumes excellent credit and a loan term of 24 or 36 months. Your APR will depend on a variety of factors including your creditworthiness, term of loan, and existing relationship with Citi. For example, if you borrow $10,000 for 36 months at 15.99% APR, to repay your loan you will have to make 36 monthly payments of approximately $351.52.
There is a 0.5% APR discount if you enroll in automatic payments at loan origination. Additionally, existing Citigold and Citi Priority customers will receive a 0.25% discount to the interest rate. If you are in default, your APR may increase by 2.00%. No down payment is required. Rates subject to change without notice.
You must be at least 18 years of age (21 years of age in Puerto Rico). Co-applicants are not permitted. Loan proceeds cannot be used for post-secondary educational or business purposes.
If you apply online, you must agree to receive the loan note and all other account disclosures provided at loan origination in an electronic format and provide your signature electronically.
Credit cards issued by Citibank, N.A. or its affiliates, as well as Checking Plus and Ready Credit accounts, are not eligible for debt consolidation, and Citibank will not issue payoff checks for these accounts. If you are unsure of the issuer on the account, please visit https://www.citi.com/affiliatesproducts for a list of Citi products and affiliates.
*Upstart Loan Disclaimer
The full range of available rates varies by state. The average 3-year loan offered across all lenders using the Upstart platform will have an APR of 21.97% and 36 monthly payments of $35 per $1,000 borrowed. For example, the total cost of a $10,000 loan would be $12,646 including a $626 origination fee. APR is calculated based on 3-year rates offered in the last 1 month. There is no down payment and no prepayment penalty. Your APR will be determined based on your credit, income, and certain other information provided in your loan application.