Loan companies are constantly on the lookout for defaulters. They go to great lengths to scrutinise your application for the loan before they accept it.
But what do you do if your financial statements are a hindrance in getting the loan you need? Is there still a way for you to secure a loan?
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What Are Unsecured Personal Loans?
An unsecured loan is a loan that is given based entirely on the borrower’s credit score. It does not require any collateral for the loan, such as a house or car. Since unsecured loans are riskier for lenders, they carry higher interest. Personal loans are loans that can be taken for any personal need for example to pay a debt, buy a car, pay for medical expenses, etc. Most personal loans are unsecured.
Unsecured personal loans are, hence, loans that are taken out for personal reasons and do not require any collateral. They are paid back as monthly instalments with interest.
Can I get a personal loan with bad credit with a cosigner?
A cosigner is a person who agrees to be responsible for the primary borrower’s debt if he or she defaults on their loan payments. The cosigner has no right or ownership over the loan being given. The cosigner is also required to have a good credit score and a long financial history.
Can you apply for a personal loan with a cosigner? Yes, depending on your loan provider and your ability to find a willing co-signer. Cosigners increase the chances of a loan being returned to the lender, hence increasing the chances of the borrower qualifying for the loan.
Before you opt for a cosigner, make sure you check with your company to see if they allow this option or not. Listed below are 5 best lenders for 2020 who accept cosigners:
- Laurel Road
- OneMain Financial
These lenders are 2020’s best picks for getting a personal loan with a cosigner. The loan amounts vary from $1,500 to up to $45,000.
Is It Easier To Get A Loan With A Cosigner?
A cosigner makes getting a loan easier for borrowers whose credit histories are bad or non-existent. If the company is satisfied with the good credit score of the co-signer, they’ll gladly hand out the loan. The real question is, is it easy getting a cosigner?
Co-signing is a risky move, especially since the co-signer does not get any rights over the ownership and usage of the loan that they may potentially have to pay for in the future. A defaulter impacts negatively on their credit score and brings it down. The cosigner is also the first person that the lending company will sue if the payments are not made on time. Even if the company chooses to not sue you, and you settle for a lesser debt, it will leave a negative mark on your financial report. For these reasons, it is quite an achievement if you can convince someone to cosign on your loan. Usually, parents cosign on loans for their children or a spouse can cosign for their partner. Once someone has agreed, however, it gets easier to get the loan.
I Need A Cosigner For Personal Loan
So you applied for a personal loan but got rejected because of bad credit history. You don’t have anything to offer as collateral. You read in your company’s policy that they accept cosigners on loans. Delighted, all you need now is a cosigner for your personal loan. How do you choose?
A cosigner should be someone who is close to you, trusts you and has a better credit history and income than you. If you are a student looking for a student or car loan, you can ask your parents to cosign. If you feel like their credit history might prove insufficient, you can check with an aunt, uncle, grandparent or close cousin. The ground rule for looking for a cosigner is trust – there should be mutual trust between you and the cosigner.
Since the cosigner is entering into a potentially risky undertaking, it will help if you can provide some ease of mind to them. How can you do this? For starters, apprise the cosigner of the entire situation. Tell them in detail why you need the loan and how it will help you. Tell them how you plan to spend the money. The cosigner, since they have known you for a long time and trust you, will be able to understand if your reason is genuine.
Secondly, keep the cosigner in the loop regarding your expenses. Tell them how you plan on paying back the loan. Essentially, you should have the money to pay the loan yourself. Getting the cosigner’s confidence in your finances will make it easier for them to agree to help you with the loan.
If you feel your cosigner is still in doubt, you can make a deal with them. You can sign an agreement separately that states that you are liable to pay back the cosigner whatever amount he or she pays on your behalf to the loan company. In this way, you take away some of the risks the cosigner may be worried about.
You may also go for a temporary cosign. That is, your lender should allow for a cosign release after you have made a certain number of the monthly payments. This will put your cosigner at ease as the lender will remove the cosigner’s name from the loan obligation after the set number of payments are made.
How To Get Personal Loan With A Cosigner
To get a cosigner for a loan, follow the following steps:
- Check that your lender allows for a cosigned loan. Not all lenders will have this policy.
- Submit an application for obtaining a loan on cosigning.
- Provide your information as well as your cosigner’s information in detail. This will include social security numbers, income amounts, debt obligations, income receipts, tax returns etc.
- Go over the terms and conditions of the loan with the cosigner. Make sure you agree to all of them. And remember to read the fine print.
Once you are sure that the conditions for the loan are favourable and suit you, you and the cosigner will sign the contract. And that’s it! You now have a personal loan with the help of your cosigner!
What Credit Score Does A Cosigner Need For A Personal Loan?
The cosigner needs to have an exceptionally good credit score to help you out. Though it varies from lender to lender, a score of 670 is a decent ballpark figure.
Cosigning is a great alternative if you are unable to qualify for your own loan. You may even get better rates than if you were applying alone. Keep in mind to choose the cosigner carefully and do not jeopardize your relationship over monetary issues.