Can you get a personal loan with a co-signer?

When you apply for a personal loan, the lender will usually review your credit history and financial situation before deciding whether to give you the money.

The decision may be straightforward from the lender’s point of view if you have an excellent credit score and can prove you have a high income. But if your application doesn’t meet the lender's requirements, you may be able to increase your chances of getting a loan with a co-signer.

A co-signer essentially gives the lender someone else to turn to if you are unable to pay your loan back.

While not all lenders are in favour of applying with a co-signer, some will consider it. Read on to know how to get a personal loan with a co-signer.

Here’s how you can get a personal loan with a co-signer

A co-signer agrees with the lender that they will take on the loan repayments if you can no longer pay them.

At the time of your loan application, both you and the co-signer have to submit your personal and financial information for review. Generally speaking, the lender will be looking to make sure the co-signer has a good history of paying back loans on time.

How do I know I need a co-signer?

If you have a great credit score and a good income, you’re unlikely to need the help of a co-signer. However, there are certain situations where people tend to consider using a co-signer on a personal loan application:

• When unemployed: If you depend on welfare or sources of income other than your own, a co-signer on your application could help fulfil the lender’s income requirements. Keep in mind, there are other options available for people who are unemployed and it could be worth looking to community organisations and Centrelink for other loan options. 
• A credit score that is less-than-perfect: A co-signer with stronger credit may increase the chance of approval or attract more competitive rates.
• Borrowing more: Sometimes people are limited in how much they can borrow alone, but can borrow more with a co-signer.

What are the benefits and drawbacks of applying with a co-signer?

There are certain advantages of applying for a personal loan with a co-signer, which include:

• It could help to get a larger loan
• It may attract lower interest rates
• It could improve your overall chances of approval

There is also a flipside to applying for a personal loan with a co-signer:

• It can take longer for application and approval
• You could still get rejected if their credit isn’t good enough
• If you default, it could affect their credit too
• Your co-signer’s ability to borrow may be affected in the future
• The loan could put a strain on your relationship.

What should I look for before approaching a co-signer for a personal loan?

Your co-signer needs to meet certain criteria to be eligible to cosign.

• Generally speaking, the higher their credit score, the better the chances.
• A co-signer should have a job, be over 18 years of age and be an Australian citizen or permanent resident.
• They should have enough money in their budget to make monthly repayments if you stop paying.
• A co-signer with a high debt-to-income ratio may not be eligible to take on the responsibility of another loan.
• Once they sign on to your debt, they might find it challenging to qualify for a loan of their own.
• Joint applications can be risky, and it’s important to trust the co-signers, which is why many applications are with relatives or close friends of the borrower.

What must I consider before I can get a personal loan with a co-signer?

Cosigning on a loan is a big responsibility, and if you default on the payment, your co-signer becomes liable. Answer these three questions before applying for the personal loan with a co-signer.

1. How much are you borrowing? A small loan may be more attractive to a co-signer because it’s easier for you to repay. Plus, their liability is lesser with a smaller loan.
2. How often do you need to make payments? Be clear about the frequency and other terms of repayment. This will affect your co-signer in case you default.
3. What is the loan for? Be upfront with your co-signer about why you’re taking out a loan.

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