A Guide to Finding a Personal Loan with a Cosigner

ByTop10.com StaffJan. 21, 2021

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Getting a cosigner can help secure a loan
If you have less than ideal credit or no collateral to put down, it can be difficult to get a personal loan with a low interest rate. This is where cosigning a loan can really help. With a low credit score (620 or lower), you stand to face some real reluctance, if not just flat out rejection, with many lending houses. Even if you are approved you stand to pay a high interest rate of 15% or higher.

You may manage to find an even more ideal loan that better suits your needs, but if you have a cosigner with good credit and stable income though, you can apply for a loan using the cosigner as an insurer of sorts for the loan, allowing you to attain a loan with conditions that are easier to keep up with.

A cosigner agrees to cover the payments if you default, serving as collateral for the loan.

Why Apply for a Personal Loan With a Co-Signer?

The main reason to pursue a personal loan with a cosigner is that you may be able to qualify for a loan that you wouldn't receive otherwise. If your cosigner has better credit than you and reliable income, then together you can qualify for a loan with a much friendlier interest rate that can really help your bottom line.

If you enter into a co-signed loan, you can repair your credit history and improve your score by paying off the loan. This can help you establish a positive credit history, and the co-signer can also build more good credit through the shared loan.

If you have other outstanding loans with high interest rates, a co-signed loan can allow you to take out a big enough amount of money to pay off your higher interest loans, bringing all of your debt under one lower interest rate.

Compare top personal loan lenders >>

What Are the Risks?

The cosigner is on the hook for the loan so if you miss the payments they stand to take a serious hit to their credit rating. With a cosigned loan you increase the number of people at risk of financial harm if the loan is not paid on schedule.

If the cosigner’s credit isn’t much higher than yours, then the terms you get might not be good enough to offset the risk you’re asking the cosigner to undertake.

A hard credit history pull could potentially harm the co-signer's credit from the get-go.

How Does it Work?

When you have a cosigner loan, there is less risk involved for the loan provider, therefore they are able to offer better rates and lower monthly repayments. 


With Cosigner Without Cosigner
Loan Amount $10,000 $10,000
Loan Term 5 years 5 years
Interest Rate 10% 15%
Monthly Repayments $212 $239
Total $12,748 $14,274

A $10,000 personal loan at 15% interest over 5 years will cost $237.90/month, and after 60 months you will have paid a total of $14,274 by end of term. The same loan with a cosigner, brought down to a friendlier 10% interest rate, will cost $212.47/month for a total of $12,748.20 by the end of the term.

How Do You Find a Cosigner?

Typically a cosigner will be someone close to you - a parent, sibling, or even an in-law. This can be uncomfortable, and if you default, it could harm your personal relationship with the cosigner. Therefore, when choosing a cosigner, make sure it's someone you trust and that you have a good relationship with.  

Choosing someone you're close to is important, but you also need to make sure that they are actually financially stable and will be able to help you out if you run into difficulties. Take the time to ask them about their financial status to confirm that they indeed have a reasonable credit score and solid borrowing history. While this can be a sensitive subject, it shouldn't be a problem if the person you choose is either a family member, close friend or a trusted work colleague. 

 sofi Minimum credit score: Good +

Loan amount: $5,000-$100,000

Loan term: 24-84 mo.

APR range: 5.99% - 20.69% (with AutoPay)

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 marcus Minimum credit score: Good +

Loan amount: 

$3,500-$40,000

Loan term: 36-72 mo.

APR range: 6.99% - 19.99%*

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 fiona Minimum credit score: Poor +

Loan amount: 

$1,000-$250,000

Loan term: 24-84 mo.

APR range: 4.99% - 35.99%

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 Monevo Minimum credit score: Poor +

Loan amount: 

$500-$100,000

Loan term: 3-144 mo.

APR range: 3.49% - 35.99%

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What Now?

Bad credit can get you down, but by no means does it have to be a deal-breaker if you’re looking for a personal loan. With a cosigner in hand you can receive a personal loan that can help you consolidate debt or just give you a little more breathing room financially. So take a look around and find a lender with terms that work for you.

Still can't decide? Feel free to check out our comparison chart to discover the best personal loan providers.