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Financial Literacy

Getting a Personal Loan with a Cosigner

There are several key advantages to getting a cosigner for your loan, but it’s important to understand all of the details first.

If you’re in the market for a loan but your credit history is less than stellar, it may be worth your while to consider getting a cosigner for your loan. In addition to making strides to improve your credit score, signing for a loan with someone else–generally a friend, family member, or loved one who has a better credit score–has many benefits. Here’s what you need to know about co-signing a loan.

First of all, a cosigned loan is not the same as a joint loan. Learn about joint personal loans here. The essential difference is that with a joint loan both borrowers are using the funds, as opposed to cosigning, in which the cosigner isn’t accessing the funds, but does share the financial responsibility for repayment.

Benefits of Loans with a Cosigner

There are three main benefits for potential borrowers looking to co-sign a loan.

  • Cosigned loans can improve your odds of getting approved
  • Getting a cosigner for your loan can even get you a lower interest rate
  • Cosigned loans may also allow you to borrow more

Let’s look at each of these in more detail.

Higher Likelihood of Loan Approval

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If you’re rebuilding your finances or have a poor credit history, having a co-signer with a good credit score can be a huge advantage. Say you have a major purchase coming up and you applied for a personal loan with your local bank – only to find out you didn’t get approved since your credit score is low. By getting a co-signer, your chances of being approved for a loan are higher when partnering with somebody who has a healthier credit history. Applying together can increase the chances you’ll be approved, since it poses a lower risk to lenders.

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Securing a Low-Interest Rate

Interest rates tend to be much higher for those with a less-than-perfect credit history because lenders assume they’re more likely to default. Essentially, the higher the risk, the less likely a lender is to lend to you. But with a co-signer, you’re not only more likely to get approved for your loan –you might be able to score a lower interest rate in the process.

For example, let’s say you and your spouse are looking to take out a loan to put toward some home improvement projects. You, however, have a ton of student loan debt under your belt. That debt has adversely affected your credit score over the years, bringing it down from excellent to average. However, your spouse is in great financial shape and has an excellent credit score. By co-signing a loan with your spouse, you’ll reap the benefits of their credit score and will likely be able to get a lower interest rate.

Access to a Larger Loan Amount

As we know, potential borrowers with a strong financial history are more likely to get better terms for their loans. These superior terms include the size of the loan. By co-signing for a loan, you and your co-signer reap the benefits of two people’s financial history – especially if you’re trying to borrow with a less-than-perfect credit score. This means the amount of money you can borrow on your loan may be higher, and you can have more cash to dip into when you need it. 

Before Cosigning a Loan, Understand the Process

When you have a cosignatory (cosigner) for a loan, the lender knows that you and your co-signer will share all the loan’s legal and financial responsibilities.  In the event of missed or late payments, both borrowers are equally responsible for the amount owed. If you or your co-borrower can’t keep up with payments, you could be sued by the lender, have your paychecks garnished, and even wind up in bankruptcy court.

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There are many benefits to getting a loan with a cosigner if your financial health isn’t where you want it to be. Keep in mind that once you co-sign, it’s a long process to remove a co-signer from a loan.  Make sure you are cosigning with somebody you trust and who understands their financial responsibilities. 


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1  For example, a three-year $10,000 personal loan would have an interest rate of 11.74% and a 5.00% origination fee for an annual percentage rate (APR) of 15.34% APR. You would receive $9,500 and make 36 scheduled monthly payments of $330.90. A five-year $10,000 personal loan would have an interest rate of 11.99% and a 5.00% origination fee with a 14.27% APR. You would receive $9,500 and make 60 scheduled monthly payments of $222.39. Origination fees vary between 1% and 5%. Personal loan APRs through Prosper range from 6.99% to 35.99%, with the lowest rates for the most creditworthy borrowers. 

Eligibility for personal loans up to $50,000 depends on the information provided by the applicant in the application form. Eligibility for personal loans is not guaranteed, and requires that a sufficient number of investors commit funds to your account and that you meet credit and other conditions. Refer to Borrower Registration Agreement for details and all terms and conditions. All personal loans made by WebBank.

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