Should you ask someone to co-sign your loan? Here’s what to know

Lenders consider your credit scores and income when evaluating your loan application. A poor or limited credit history could make it harder to get approved or mean you pay higher interest rates if approved. Similarly, a low income or high debt levels could keep you from the loan you need.

The solution to both problems could be to get a personal loan with a co-signer. Your co-signer's good credit or income could persuade the lender to approve you or give you a lower rate. 

However, it's a big ask to have someone co-sign a loan, since they share responsibility for the debt. And you may not feel all that comfortable about letting them know your credit isn't as great as you'd like it to be. 

Getting a co-signer for a personal loan works best when both sides understand their responsibilities and there's mutual trust between you. Let's look at how co-signing works, and the pros and cons of having a co-signer. 

What it means to have a co-signer on a personal loan

What happens when someone co-signs a loan? To start with, they agree to let the lender check their credit as part of the loan application process. If the application is approved, the co-signer agrees to share legal responsibility for the debt with you. 

If you can't repay what you borrowed, the lender will expect your co-signer to pay. Co-signed loans also typically show up on both your credit reports. 

As long as you make your payments on time, that could benefit your credit score and your co-signer's. On the other hand, if you miss a payment or default and the loan goes to collections, those negative marks could hurt your credit score—and your co-signer's. 

Who can co-sign a loan? 

Anyone of legal age could potentially co-sign a loan, provided they have a solid credit history and income. However, a co-signer is usually someone you know well. For example, you might ask a parent or other relative to co-sign. Friends could also be co-signers. Your comfort level with talking about your credit will likely play a part in who you decide to ask. 

Read our detailed guide on co-signed loans to learn more.

When asking for a co-signer might make sense

Should you ask someone to co-sign your personal loan? A co-signer could help you qualify or get a better rate, but it’s a serious shared responsibility. It's usually best to only ask someone if you’re absolutely confident you can make on-time payments for the entire life of the loan.

So, when should you get a co-signer for a personal loan? It might make sense to ask someone to co-sign if you have fair credit or limited credit, but your income is steady and stable. It's best in situations where you know you can afford the payments, but you need a little help to qualify for the loan because of your credit.

Lenders use your credit scores to gauge how you manage debt, but they also want to know you have the money to make loan payments consistently each month. A higher income and a co-signer on board could help to offset a lower credit score. 

When you might want to think twice about asking someone to co-sign your personal loan

You should pass on getting a personal loan with a co-signer if there's any chance you won't be able to keep up with the payments. For example, if income is unsteady or you're struggling with other debt payments, adding a co-signed loan into the mix could be a problem.

What are the disadvantages of having a co-signer?

Asking a friend or family member to co-sign a loan could add a serious emotional component to an already important financial move. If things go wrong, your relationship with your co-signer could be damaged.

If you can't pay the loan as agreed, the lender could start collection actions against you and your co-signer. You could both be sued for the debt and have your bank account or wages garnished if the lender wins their case. Even if you're not sued, both your credit scores could take a hit if the lender reports the account as delinquent. 

All of that could harm your relationship with your co-signer. Getting a personal loan with a co-signer could solve some short-term financial problems. But it may not be worth it in the long run if falling behind on payments means the end of a relationship with a loved one 

How to talk about co-signing responsibly

If you have someone in mind to co-sign a personal loan, sit down with them and talk things through. Explain to them that if they agree, they'll be equally responsible for the debt, even if you're the only one making payments. Go over the impact on their credit scores and what could happen if you can't pay the loan for any reason. 

You might offer to draft a written repayment agreement that details what you'll pay. It won't override the agreement with the lender, but it could give your co-signer some reassurance that you're serious about repaying the loan. You could also look into ways to take them off the loan after you're approved. 

Can I remove a co-signer from a loan? 

Maybe, if certain conditions are met. Some lenders offer what's called co-signer release after you make a specific number of payments on time. If that's not an option, you could refinance the loan into your name only if your credit score significantly improves. 

Alternatives to using a co-signer

If you can't find someone who will agree to co-sign or you don't want to put that responsibility on anyone else, you could look into other options to borrow. 

For example, you might apply for a secured loan. Secured loans require you to give the lender collateral, or something of value that you own. For example, you might pledge a piece of land, a car, or a bank account. If you don't repay the loan, the lender gets to keep your collateral. 

A secured loan reduces risk for the lender, which could make it easier for you to get approved. You could also get a lower interest rate on a secured loan vs. an unsecured loan. Personal loans for bad credit are another option, since borrowers can get accepted with lower credit scores. However, the rates may be higher. 

If you don't need to borrow right away, work on your credit score to try to improve it. Some of the best ways to boost your score include paying bills on time and paying down existing debts. If you raise your score enough, you might not need a co-signer at all when you're ready to borrow. 

Choosing a financial path with confidence

Getting a personal loan with a co-signer could help you move forward financially. It's okay to ask for help when you need it, as long as you do it wisely and both of you understand what you're agreeing to from the start. 

Before you approach a co-signer, check your rate with Achieve Personal Loans to find out if you qualify by yourself. It won't affect your credit, and you could get a decision in minutes.