Getting a deal on a personal loan usually requires good credit and a decent income. If you have less-than-perfect credit, personal loans with a co-applicant are an option to secure financing.
Adding a personal loan co-applicant to the mix will complicate things a little. There are additional considerations, discussions to have and paperwork to fill out. And not every personal loan provider allows cosigners.
However, applying for a personal loan with a co-applicant is definitely possible, and in some cases, preferable. It can improve your chances of approval and even help you secure a better personal loan rate.
Here’s how to weigh your personal loan co-applicant options and make the best choice for your finances.
Options for personal loans with co-applicant
When getting a personal loan, it’s possible you can apply jointly for the loan with another person as a co-borrower or a co-signer.
In both cases, both co-applicants’ credit histories are considered to approve the loan. Both applicants’ future credit scores will be affected by the new loan’s repayment history.
But “co-signer” and “co-borrower” have some key differences. Make sure you understand the details of your personal loan with co-applicants to be sure it’s leading to the arrangement you want.
What is a co-borrower?
When two people apply for a personal loan together, they are viewed as co-borrowers. This is usually the case in personal loans used for joint ventures.
For instance, an engaged couple might want to be co-borrowers on a personal loan for a wedding. Spouses might want personal loans with co-applicants to consolidate their separate debts together. Business partners might want to be viewed as co-borrowers on a loan used to launch their venture.
Obviously, there are situations when it makes sense to have a joint borrower. Each applicant is considered equally in approving the loan, including each co-borrower’s income and credit history. The co-borrowers are also equally entitled to the funds from the personal loan, and are equally responsible for repayment.
Because both borrowers’ incomes are considered, this arrangement can boost your chances of approval higher than just a cosigner. It is also more likely to result in lower interest rates.
What is a co-signer?
A co-signer is different from a co-borrower, and serves a different purpose. A co-signer will improve your chances of qualifying for a personal loan; if your credit score isn’t good enough to qualify, your co-signer’s credit score and history are also considered.
Your personal loan co-signer will apply with your for the loan. Usually, only a co-signer’s credit information is considered, not their income.
Additionally, a co-signer has no rights to the funds borrowed through the loan. Those still go to the primary loan applicant, who also has the responsibility to make loan payments. The lender will only pursue a cosigner for loan repayment if the borrower defaults on the personal loan.
How to get personal loans with co-applicant
Find a willing co-applicant
The first thing you’ll need if you’re hoping to get personal loans with a co-applicant? Find someone who’s willing to be the second signature on the loan.
If you’re applying for a personal loan with a joint borrower, you probably already have someone in mind. It’ll be the person who is sharing and equally benefitting from the loan, such as your significant other, spouse, or business partner.
If you’re looking for a co-signer, you can also start with a significant other. But it’s also common for parents or other family members to agree to co-sign a personal loan.
When discussing the personal loan with your co-applicant, make sure you cover the financial responsibilities. Talk about making payments and what you’ll do if you’re ever in danger of missing a payment. Consider how the loan will affect each applicant’s credit.
Everyone will need to understand the arrangement and set expectations to minimize the potential for harm to the relationship.
Find personal loans that allow cosigners or co-borrowers
Once you have someone who’s agreed to be your co-applicant, you’ll need to find lenders who accept personal loans with co-applicants.
If you want to apply as co-borrowers, a credit union or traditional bank might be a good place to start. These institutions have wide range of personal loan products and options.
Citizens Bank, for instance, is a traditional bank that offers personal loans online. They allow co-applicants for their personal loans and set rates based on the higher FICO score.
For borrowers who want a simple personal loan with a co-signer, many brick-and-mortar banks and online lenders, like Earnest, accept personal loans with co-signers.
Apply for a personal loan together
The last thing is to choose a lender and submit your personal loan application. You’ll need to submit your information and your co-applicant’s.
The lender’s application process will walk you through how to add a second applicant, as well as prompt you to provide relevant documents or verification.
Earnest, for example, usually tries to process your application with your information alone. If you don’t qualify on your own, Earnest will notify you to resubmit an application with a co-signer. Citizens Bank, on the other hand, allows co-applicants for personal loans to apply together from the start.
Not sure where to start? Here are the top banks for those looking for a personal loan.
Interested in a personal loan?
Here are the top personal loan lenders of 2017!
|Lender||Rates (APR)||Loan Amount|
|* = includes AutoPay discount|
|4.77% – 14.24%*||$5,000 – $100,000||Visit SoFi|
|5.25% – 12.00%||$2,000 – $50,000||Visit Earnest|
|5.75% – 16.24%1||$5,000 – $50,000||Visit Citizens|
|5.67% – 29.99%||$1,000 – $50,000||Visit Upstart|
|6.20% – 19.75%||$3,000 – $25,000||Visit Pave|
|8.00% – 25.00%||$5,000 – $35,000||Visit Payoff|
|9.95% – 36.00%||$1,000 – $35,000||Visit Avant|
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