Pros and cons of getting a personal loan with a co-signer or co-borrower

By Gideon Sandford

Reviewed by Kimberly Rotter

Jan 30, 2023 - Updated May 29, 2023

Read time: 5 min

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Key Takeaways

  • Co-signers guarantee your loan but aren’t responsible for making payments unless you default.

  • Co-applicants apply with you, get access to the money, and share responsibility for repaying the loan.

  • Applying with a co-applicant can be a great way to lower the cost of your personal loan.

If you’re worried that you might not get approved for a personal loan, applying with a co-signer is one way to improve your chances. But if you’re looking for the best possible deal financially, applying with a co-applicant might help you more. 

What does it mean to be a co-borrower, co-applicant, or co-signer on a personal loan?

A co-applicant is someone who applies for credit with you. If you are approved, you become co-borrowers. You both get access to the loan funds, and you share responsibility for the debt. Co-borrowers typically work together to repay the loan, but the actual financial arrangements for repayment are up to you. 

A co-signer is someone who guarantees a debt for someone else. Co-signers don’t get the loan funds and are not responsible for making payments unless the primary borrower fails to do so. In that case, the lender will hold the co-signer responsible for whatever amount is still owed. 

Applying with either a co-signer or a co-applicant can help you qualify for a loan or get a lower interest rate.

Reasons to use a co-signer on a personal loan

The most common reason to use a co-signer on a personal loan is to be approved for the loan. If you have blemishes on your credit report, a co-signer with better credit can help you get approved. 

If your co-signer has a stronger credit profile, higher income, and few or zero late payments on their credit report, then adding them to your loan application can increase the amount you’re eligible to borrow or help you get a lower interest rate.

What a co-signer needs to know before signing on a personal loan

Co-signing a loan means you’re agreeing to repay it out of your own pocket if the primary borrower defaults. Co-signing is a huge favor that puts the co-signer at financial risk. If the primary borrower misses a payment, the lender can take the same legal actions against the co-signer as the primary borrower, up to and including filing a lawsuit and even garnishing their wages.

If you’re asking someone to co-sign your loan, or you’re being asked to co-sign a loan, think about the potential pitfalls carefully. If you can’t make your payments on time, is it going to put your relationship at risk? Are you willing to repay someone else’s debt if they can’t make the payments? 

If any of this makes you uncomfortable, consider that it’s possible to improve your credit within a few months and try to qualify on your own. That’s especially true if your low credit score is the result of an isolated incident, but you otherwise handle your accounts responsibly. 

If you want to get rid of your credit card debt but can’t qualify for a personal loan without a co-signer, you can look into a debt resolution program. A professional debt negotiator can help you get out of debt faster and for less money compared to slogging it out with minimum payments. And you won’t need to ask anyone to co-sign - and take a financial risk - for you.

What a co-applicant needs to know before signing on a personal loan

Being a co-applicant, and later a co-borrower, means you and the other person are on a financial journey together. You are both borrowing the money, you both have a right to access it, and you are both equally responsible for paying it back. 

Co-borrowing has many advantages. From the lender’s point of view, co-applicants represent a lower risk than single applicants. That’s why you might get more favorable terms if you apply with a co-applicant.

Applying together means you get to use both people’s incomes to qualify, which might mean a bigger loan. If your co-applicant has much stronger credit, the lender might offer better terms than you’d get on your own.

And best of all, in some cases, when you apply for a personal loan with a co-applicant you might be able to get a discount on the loan itself.

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The pros and cons of co-signed personal loans

Co-signer pros

Co-signer cons

Can help someone with bad credit qualify for a loan or get better terms

Co-signer does not benefit from the loan 

Can help the primary applicant build credit

Creditor can go after the co-signer if the primary borrower falls behind

Can be more affordable than other options in an emergency or if your credit is poor

Missed payments show up on both people’s credit reports

Could lower co-signer’s borrowing power until the loan is repaid

Can damage your relationship if loan repayment doesn’t go well

The pros and cons of having a co-applicant on a personal loan

Co-applicant pros

Co-applicant cons

Might qualify for larger loan

Both people are fully responsible for the debt from day one, even if you have a private agreement or divorce decree naming one borrower as responsible

Loan is for the benefit of both applicants

Might get a discounted interest rate by applying together

Applying for an Achieve personal loan with a co-applicant

You can apply for an Achieve personal loan with a co-applicant for almost any financial need. It can be a great way to accomplish a financial goal like these:

  • Consolidate credit card debt 

  • Pay off medical bills or tax debt

  • Take care of repairs and maintenance on your home

  • Buy appliances or electronics

  • Move to a new home

  • Finance an education

Achieve offers three ways to get a discount on your personal loan interest rate, which can save you money for the entire life of your loan. Discounts are available if you:

  • Apply with a qualified co-applicant

  • Use at least 85% of the loan funds to directly pay off other debt

  • Show proof of retirement savings (it’s not used as collateral)

Achieve loan terms are flexible, with repayment periods between two and five years. You might get loan approval the same day you apply, and get your funds in 24-72 hours.

Gideon is a financial expert who writes about financial planning, access to credit, and debt strategies. He has over a decade of experience helping readers manage their money and use debt responsibly.

Kimberly is Achieve’s senior editor. She is a financial counselor accredited by the Association for Financial Counseling & Planning Education®, and a mortgage expert for The Motley Fool. She owns and manages a 350-writer content agency.

Frequently asked questions

The amount you can borrow with a personal loan largely depends on your income and how much other debt you have (your debt-to-income ratio). Some lenders will take your co-signer’s income into consideration when determining how much you can borrow. If they do, you might be able to borrow more than you’d qualify for alone.

A co-applicant often increases your borrowing power because the lender will look at both people’s incomes to determine whether you can afford your payments.

Achieve personal loans are available up to $50,000.

Yes. Since lenders are able to count on the income and assets of both the primary borrower and the co-signer, even people with lower credit scores, shorter credit history, or other repayment issues can get loans if their co-signer qualifies. 

A personal loan can have several advantages over credit card debt. First, personal loans typically have lower interest rates compared to credit cards, which can save you money on interest charges over time. Additionally, personal loans often have a fixed repayment schedule with a fixed interest rate and monthly payments, which can make it easier to budget and plan your payments. This can also help you pay off your debt faster and potentially improve your credit score.

No, you can't pay your monthly credit card bill directly with a personal loan. You can make credit card payments with a bank transfer or other forms of payment, such as a cashier’s check or money order.

However, you can pay your credit card debt with a personal loan. Some lenders can even use your loan to pay them directly on your behalf. The loan will have a fixed interest rate and a fixed payment amount, making it easier for you to manage your payments.

A joint personal loan is any personal loan with two or more co-borrowers. All co-borrowers are equally responsible for making sure the loan is repaid in full and on time.

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