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If you’re not getting approved for a personal loan or not getting the rates and terms you’d like, applying with a cosigner may help.
A cosigner promises to pay off your loan if you can’t. As a result, if you apply with a well-qualified person, you can often borrow a larger loan amount at a lower cost. But which lenders allow for cosigners and offer competitive personal loans?
After reviewing a lineup of lenders based on factors like maximum loan amount, fees, and minimum fixed annual percentage rates (APRs), here are those that topped the list.
Getting approved for a personal loan with bad credit can be challenging. Lenders see borrowers with low credit scores as risky so they either charge extremely high interest rates or deny the application altogether. However there is a solution – adding a cosigner to your loan application.
A cosigner is someone who agrees to be legally responsible for repaying the loan if the primary borrower defaults. The cosigner’s good credit helps offset the risk of lending to someone with poor credit. With a cosigner, you stand a much better chance of qualifying for a loan and securing reasonable loan terms.
In this comprehensive guide, we’ll explain everything you need to know about getting personal loans for bad credit with a cosigner
What is a Cosigner?
A cosigner also known as a co-applicant or guarantor is a second person who signs onto a loan. They agree to take equal responsibility for making the loan payments. If the primary borrower misses payments, the lender can seek repayment from the cosigner.
Adding a cosigner allows borrowers with poor credit to qualify for loans that they normally wouldn’t get approved for on their own. The cosigner’s good credit score, income, and overall financial profile helps offset the risk of lending to someone with bad credit.
Cosigners can be almost anyone – a spouse, parent, family member, or close friend. But they should fully understand the obligation they are taking on before agreeing to cosign a loan.
Benefits of Using a Cosigner
Here are some of the biggest advantages of getting a personal loan for bad credit with a cosigner:
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Higher approval odds – With a cosigner’s good credit backing you, lenders see you as less of a risk, so you’re much more likely to get approved.
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Lower interest rates – Interest rates are primarily based on credit scores. So by boosting your creditworthiness with a cosigner, you can qualify for much lower rates.
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Larger loan amounts – Most lenders limit loan amounts for borrowers with poor credit. But with a cosigner, you may be able to borrow more money.
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Better loan terms – In addition to lower rates, having a cosigner can help you secure better terms like a longer repayment period or flexible payment options.
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Faster funding – Loans with cosigners often get funded faster than other loans since the lender has extra assurance you will repay it. Many lenders provide funding in as little as one business day.
Risks of Using a Cosigner
While cosigning a loan can certainly help you get approved, there are some risks to consider:
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The cosigner is equally responsible – if you default, it damages their credit too.
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It can strain relationships if you struggle to make payments.
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Both your and the cosigner’s credit scores take a hit from the hard inquiry.
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The cosigner’s debt-to-income ratio rises, potentially inhibiting their ability to get other loans.
To limit risks, only choose a financially stable cosigner who fully grasps the obligation they are undertaking. Also, keep them updated on your ability to repay so they aren’t caught off guard.
Finding a Reputable Lender
With a cosigner on board, make sure to shop around and find a trustworthy lender offering reasonable rates and fees. Here are a few top lenders to consider:
LendingClub
- APR Range: 8.98% – 35.99%
- Loan Amounts: $1,000 – $40,000
- Loan Terms: 24 – 60 months
Lightstream
- APR Range: 6.99% – 25.49%
- Loan Amounts: $5,000 – $100,000
- Loan Terms: 24 – 84 months
OneMain Financial
- APR Range: 18.00% – 35.99%
- Loan Amounts: $1,500 – $20,000
- Loan Terms: 24 – 60 months
We recommend comparing quotes from multiple lenders to find the best loan option. Focus on the APR, fees, loan amount, and term length to choose the most affordable loan.
What Credit Score is Needed?
Every lender has its own credit requirements, but most require a minimum credit score between 580-640 to qualify for a personal loan with a cosigner. The exact minimum depends on the specific lender.
Even if your score is lower than 580, a cosigner with good credit can often offset your poor credit to get approved. But the better your cosigner’s score, the better the loan terms you can qualify for.
Here are rough guidelines for cosigner credit requirements:
- Good credit: 680+
- Fair credit: 640-679
- Poor credit: below 640
Before applying, check both your and your cosigner’s credit scores so you know where you stand. Improving your score, even by a small amount, can help lower interest rates.
Cosigner vs. Co-borrower
You may see the terms “cosigner” and “co-borrower” used interchangeably. But there is an important legal distinction between them:
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A cosigner has no access to the loan funds – they are only guaranteeing repayment.
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A co-borrower can access and use the loan funds just like the primary borrower.
In most cases, lenders treat cosigners and co-borrowers equally in terms of qualifying and repaying the loan. But it’s important to confirm with the lender whether your co-applicant will be a true cosigner or co-borrower.
How to Apply with a Cosigner
The application process for a personal loan with a cosigner is fairly straightforward:
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Compare lenders and pre-qualify to find the best loan option based on your needs, credit, and financial situation.
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Check credit scores for both yourself and your chosen cosigner so there are no surprises.
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Gather required documents like ID, income verification, and contact info for yourself and your cosigner.
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Complete the application online or in person – your cosigner will need to complete their portion too.
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Get an approval decision – if approved, decide whether to accept the loan terms.
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Provide additional documents the lender requests to verify your details and finalize approval.
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Sign loan agreement – both you and the cosigner will need to electronically or physically sign the final paperwork.
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Receive funding – once all steps are complete, the lender deposits the loan amount directly into your bank account, often in as fast as one business day.
It’s a good idea to keep your cosigner informed throughout the process. Also explain that the lender will likely perform a hard credit inquiry when processing the application.
Can You Remove a Cosigner Later?
Some lenders allow borrowers to apply to remove the cosigner after a certain period, typically 1-2 years. To qualify for cosigner release, you must meet requirements like:
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Making a minimum number of consecutive on-time payments (usually 12-24 payments)
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Having income sufficient to support the loan on your own
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Meeting the lender’s credit score thresholds
Even if approved to remove the cosigner, you may not get the same interest rate or terms without their credit backing you. Read the fine print carefully to understand the lender’s cosigner release policy before committing to a loan.
FAQs about Cosigner Loans for Bad Credit Borrowers
How much can I borrow with bad credit and a cosigner?
Loan amounts vary by lender, but with a cosigner, you may be able to borrow $10,000 to $40,000 or more depending on income and other qualifications.
Will applying for a cosigned loan hurt my credit?
When applying, expect the lender to perform a hard credit check on both you and the cosigner, which causes a small temporary drop in scores. If approved, on-time payments can actually help build your credit over time.
Can I get a cosigner for a mortgage or auto loan?
Yes, cosigners can be used on many types of credit products beyond personal loans, including mortgages, auto loans, student loans, credit cards, and more. The same benefits and risks apply.
What income does a cosigner need to qualify?
Lenders usually require cosigners to have steady income sufficient to repay the loan on their own if needed. Exact income requirements vary. Retirees with savings/assets may also potentially qualify as cosigners.
Can I take out another loan if I cosigned on one?
While it may be more difficult being tied to multiple loans, cosigning one loan does not necessarily preclude you from getting additional financing. But it’s smart to limit the number of loans you cosign.
The Bottom Line
While poor credit makes getting a personal loan tricky, adding a creditworthy cosigner to your application can offset banks’ concerns and help you qualify. Just be sure the cosigner understands the risk
How much you can 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, it would only cost $2,948. In this case, a cosigner could save you $3,748 over the course of the loan.
| Without cosigner | With cosigner | |
|---|---|---|
| Loan amount | $10,000 | $10,000 |
| APR | 20% | 10% |
| Loan term | 5 years | 5 years |
| Total interest cost | $5,896 | $2,748 |
| Origination fee | 8% | 2% |
| Fee cost | $800 | $200 |
| Total cost | $6,696 | $2,948 |
| Total savings | $3,748 |
To determine the amount you can save, collect quotes with and without your cosigner and compare the costs. You can enter loan amounts, loan terms, and APRs into a personal loan calculator to figure out your total interest costs. Then, just add any additional fees lenders charge, such as origination fees.
When comparing lenders, you may come across some that allow co-borrowers, but not cosigners. What’s the difference? Here’s what to know:
- A cosigner is a person who agrees to pay for a loan if the primary borrower can’t or won’t. In this instance, only the borrower (not the cosigner) can access the funds. Borrowers often enlist the help of a cosigner if they can’t qualify for a suitable loan on their own. If the primary borrower makes all the payments on time, the cosigner won’t need to do anything. However, if the primary borrower doesn’t make their payments, the responsibility to pay off the loan will fall on the cosigner. The cosigners credit could also be hurt if the cosigner makes late payments.
- A co-borrower is a person who applies for a loan with another borrower and has equal access to the funds. For example, married couples often get mortgages together as co-borrowers. Like applying with a cosigner, lenders consider the income, assets, and credit profile of both co-borrowers during the application process.
Enlisting the help of a cosigner is often better if you plan to repay the loan on your own but can’t qualify for it by yourself. On the other hand, applying with a co-borrower is better if you both expect access to loan funds.Learn More: Co-applicant vs. Cosigner
BHG Financial: Best for large personal loans
Best for large personal loans
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Eligible applicants can borrow up to $200,000
Considers borrowers with fair credit
Not available in MD or IL
Minimum annual income requirement of $100,000
Funding takes at least five days
BHG Financial stands out for offering the largest loan amounts — up to $200,000 — of any Credible partner lenders. Simply put, if you need an unsecured personal loan over $100,000, there are very few places to look, but BHG is one. Youll have up to 10 years to repay the loan, but youll need an annual income of at least $100,000 to qualify and a FICO score thats 660 or higher. However, if you have a cosigner that meets these requirements, BHG will consider your application.
Loan amounts start at $20,000, so look elsewhere for small loans. And BHG charges a modest origination fee between 2% and 4%, depending on your financial profile. Loan funds are available within three to 14 days of loan approval. Note that you cant prequalify with BHG.
3 – 10 years
Origination fees, late fees
Available in all states except Maryland and Illinois
Not on lenders site
Time to get funds
In as few as 5 days
Debt consolidation, baby (adoption), engagement ring financing, moving (relocation), business, home improvement, special occasion, cosmetic procedures, major purchase, taxes, credit card refinancing, medical expenses, vacation, wedding, other
Credible evaluated the best personal loans with a cosigner based on factors such as customer experience, minimum fixed rate, maximum loan amount, funding time, loan terms, fees, discounts, and whether cosigners are accepted. Credible’s team of experts gathered information from each lender’s website, customer service department, in-house resources, and via email support. Each data point was verified to make sure it was accurate at the time of publication.
Learn more about how Credible rates lenders by exploring our Personal Loans Lender Rating Methodology.