Stuck needing money and can’t get a loan? We’ve got some good news: the solution is easier than you ever imagined.
Even if you have very poor credit, it’s possible to get a personal loan so long as you have a cosigner. Unfortunately, many people don’t know how this process works, and they miss out on a chance to get the needed funds.
However, there’s no need to miss out. We’ve put together a comprehensive guide for how to get personal loans with a cosigner!
What Is a Cosigner?
Typically, a loan is taken out in only one person’s name. That makes that one individual solely responsible for paying back the loan.
However, good interest rates can be hard to find. And some people have trouble qualifying for a loan in the first place!
A cosigner is a good way to get a more competitive loan than you could otherwise have. And in some cases, it makes the difference between getting a loan or getting nothing at all!
Who Can Be a Cosigner
If you’re interested in exploring personal loans with a cosigner, that leaves an obvious question. Just who can be a cosigner, anyway?
The short answer? Any adult can be a cosigner for a loan. The only real trick is finding a lender that accepts cosigners as part of the lending process.
More often than not, individuals turn to family as cosigners. Some college students get parents to cosign loans to help with school expenses. In other cases, spouses cosign so that they can get a better loan for something like an automobile.
You can use a cosigner for personal loans as well. Before you do so, it’s important to understand why someone would use a cosigner in the first place.
Why Would You Need a Cosigner?
The most common reason that borrowers use a cosigner is that they have poor credit. Bad credit means that if you are able to get loans at all, they will typically have high interest rates and other annoying features.
Using a cosigner can be a real lifesaver because there will be times that you really need the money and don’t want to turn to something like a payday loan. This way, you can get the money you need without taking on high-interest rates that significantly increase your debt.
Benefits of Using a Cosigner
Now you know why people might need a cosigner. However, there are many people who could get personal loans on their own who still choose to use a cosigner.
This is because using a cosigner means access to several different benefits. The biggest benefit is a lower interest rate: when you multiply that across several years worth of payments, a low-interest rate translates to big savings.
Cosigners also help you to avoid nasty loan fees that some lenders charge. You may be able to get the loan you need with a low fee or possible no fee at all.
However, there are downsides to every good plan. And when it comes to cosigned loans, there are more than a few downsides.
Downsides of Using a Cosigner
First, just as getting the loan relies on the cosigner’s credit, paying it back (or not) affects their credit as well. That means that one missing payment could suddenly jeopardize the other’s good credit history that both of you were counting on.
Additionally, it can be difficult to remove a cosigner from your loan. Whether you want to do this to establish independence or because your relationship has suffered, it’s tough to make this change happen.
Finally, there’s the constant risk of damaging your relationship. Taking a loan out with someone is a relatively intimate act, and the stress that comes from this might lead to irreparable damage with your friends or even family members.
Knowing the Responsibilities
Like we just explained, cosigned personal loans have the potential to really damage the relationship between the two signers. That’s why it’s important for each to know their responsibilities upfront.
You both need to know what the payment schedule looks like, for instance, and who will be responsible for making payments. And each party must know how this can potentially affect their credit.
Finally, it’s important that each party knows how difficult it is to remove a cosigner. That’s part of what makes cosigning a loan such a serious process!
Explore Your Options
Once you’ve decided to get a personal loan with a cosigner, you shouldn’t rush into things. It’s good to explore all of the possible options.
For instance, there are a number of banks offline and online that offer cosigned personal loans. By “shopping around,” you can find terms that are more favorable to you and your cosigner.
The biggest factors to look out for are the interest rates and the loan fees. Knowing what others are charging can help you choose the right lender then and there or give you the knowledge you need to negotiate with another lender later on.
Don’t forget to check regarding the specific amount of money you need. And make sure you can pay it back in a reasonable time frame–the majority of these loans will be on five-year terms.
Improve Your Credit Score
Most people who use personal loans with a cosigner do so because they have poor credit. And since using cosigners isn’t a long-term solution, it’s good to focus on ways you can rebuild your credit.
If you have credit debt, pick the account with the highest interest and pay extra towards it each month. When it’s paid off, apply the old payment amount as “extra” to a new card.
This helps reduce your debt to income ratio, boosting your score. It will also improve your credit utilization: ideally, you want to use no more than 30% of the credit available to you.
Finally, make all of your payments on time. If you’re falling behind (or have already done so), contact the lender ASAP to negotiate a repayment plan!
The Bottom Line
Now you know how to get a personal loan with a cosigner. But do you have a lender that you know and trust?
At Bonsai Finance, we offer versatile financial solutions, including a number of loan options. To see how we can help, come explore our loans for people with bad credit today!