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

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 repayment of 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 could 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 could 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 could 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. 

Not all lenders accept co-signers on loan applications.

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 could help you get rid of your 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.

The pros and cons of co-signed personal loans

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

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 could 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 Personal Loans offers three ways to get a discount on your personal loan interest rate, which could save you money for the entire life of your loan. Discounts may be 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 Personal Loans’ terms are flexible, with repayment periods between two and five years. You could get a loan decision the same day you apply, and get your funds sent within 72 hours.