What is a Personal Loan with a Cosigner?
A personal loan with a cosigner is a type of loan where someone with stronger credit agrees to be equally responsible for repaying the debt along with the primary borrower. Adding a cosigner can help borrowers qualify for better rates or larger loan amounts, especially if they have limited credit history or a low credit score.
With a cosigned personal loan, the cosigner is legally obligated to repay the loan if the primary borrower cannot make payments. This reduces the risk for lenders, making them more likely to approve the loan application or offer more favorable terms.
Benefits of Getting a Personal Loan with a Cosigner
There are several potential advantages to applying for a personal loan with a cosigner:
- Higher chances of approval
- Lower interest rates
- Larger loan amounts
- Build credit history
- Potentially qualify with limited credit history
According to a LendingTree study, borrowers who used a cosigner saw an average interest rate reduction of 2.36 percentage points. This can translate to significant savings over the life of the loan.
How Cosigned Personal Loans Work
The process for getting a personal loan with a cosigner typically follows these steps:
- Primary borrower applies for the loan and adds a cosigner
- Lender evaluates both applicants' credit and finances
- If approved, both parties sign the loan agreement
- Funds are disbursed to the primary borrower
- Both borrower and cosigner are responsible for repayment
It's important to note that the cosigner does not receive any of the loan funds or have access to the money. Their role is solely to back up the loan with their own credit and income.
Who Can Be a Cosigner on a Personal Loan?
Common cosigners for personal loans include:
- Parents
- Siblings
- Other close relatives
- Spouses or partners
- Close friends
The ideal cosigner has strong credit (usually 700+), stable income, and a low debt-to-income ratio. Lenders will evaluate the cosigner's creditworthiness just as thoroughly as the primary borrower's.
Pros and Cons of Cosigning a Personal Loan
| Pros |
Cons |
| Help a loved one qualify for a loan |
Responsible for repayment if borrower can't pay |
| May improve cosigner's credit mix |
Could negatively impact credit if payments are missed |
| Potential to strengthen relationship |
May strain relationship if borrower defaults |
| No fees to cosign (typically) |
Harder to qualify for other loans while cosigning |
Risks of Cosigning a Personal Loan
While cosigning can help someone obtain needed financing, it does come with significant risks for the cosigner:
- Full legal responsibility: The cosigner is equally liable for repaying 100% of the loan balance.
- Credit score impact: Late payments or defaults will damage the cosigner's credit.
- Debt-to-income ratio increase: The loan balance counts towards the cosigner's total debt load.
- Difficulty removing cosigner: It can be challenging to be released as a cosigner once the loan is active.
- Potential collections/lawsuits: The lender can pursue the cosigner for repayment through collections or legal action.
According to a Credit Karma survey, 38% of cosigners ended up having to make payments on a loan they cosigned. This highlights the very real financial risks involved.
Alternatives to Cosigning a Personal Loan
If you’re hesitant to cosign a personal loan, there are some alternatives to consider:
For the borrower:
- Work on improving credit score before applying
- Look into secured personal loans
- Consider a credit-builder loan
- Explore peer-to-peer lending platforms
- Look into government assistance programs
For the potential cosigner:
- Offer a cash gift instead of cosigning
- Help the borrower create a budget and savings plan
- Assist with finding alternative funding sources
- Consider being a reference rather than a cosigner
How to Get a Personal Loan with a Cosigner
If you’ve decided that a cosigned personal loan is the right choice, here are the steps to apply:
- Check your credit: Review your credit reports and scores to see where you stand.
- Compare lenders: Research lenders that allow cosigners and offer competitive rates.
- Get prequalified: See estimated rates and terms you may qualify for.
- Choose a cosigner: Select someone with strong credit who is willing to cosign.
- Gather documents: Collect pay stubs, tax returns, bank statements, etc.
- Apply together: Complete the full application with your cosigner.
- Review and accept: Carefully review loan terms before accepting.
Best Personal Loan Lenders That Allow Cosigners
While not all lenders offer cosigned personal loans, here are some top options to consider:
| Lender |
APR Range |
Loan Amounts |
Min. Credit Score |
| LightStream |
6.49% - 23.99% with autopay |
$5,000 - $100,000 |
660 |
| SoFi |
8.99% - 25.81% with autopay |
$5,000 - $100,000 |
680 |
| Upgrade |
8.49% - 35.99% |
$1,000 - $50,000 |
580 |
| Prosper |
8.95% - 35.99% |
$2,000 - $50,000 |
640 |
Rates current as of June 2025. Check lender websites for most up-to-date information.
Frequently Asked Questions
Does a cosigner have to make payments?
No, the cosigner does not need to actively manage loan payments unless the primary borrower defaults. However, they are legally required to pay back any missed or unpaid amounts.
This is why it's so crucial for both parties to fully understand all aspects of a cosigned personal loan agreement before committing.
Can a cosigner be removed from a personal loan?
It can be difficult but not impossible to have the cosigner released. Options include refinancing with only one party's credit or waiting until the balance is low enough for just the borrower to qualify on their own.
Talk to your lender about any potential options, and review all requirements carefully.
How does a personal loan affect my cosigner’s credit?
The loan will appear on the cosigner's credit report as well. On-time payments can help build positive payment history for them too.
If there are late or missed payments, this could negatively impact both parties' credit scores.
