Personal Loans With a Cosigner: How They Work and When to Use One
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A cosigner could help you get approved for a personal loan, or land a lower rate, when your own credit or income falls short. Cosigning is a legal commitment, though. If you stop paying, the lender can come after your cosigner for the full balance. Both sides need to go in clear-eyed.
Table of Contents
- What a cosigner does on a personal loan
- Cosigner vs. co-borrower: what's the difference?
- When using a cosigner makes sense
- Risks of cosigning a personal loan
- How to apply for a personal loan with a cosigner
- How to remove a cosigner from a loan later
- Alternatives to getting a personal loan with a cosigner
- Bills Action Plan
- Key Terms
Maybe your loan application came back declined, or the rate they quoted made your stomach drop. Maybe someone close to you just asked you to cosign theirs, and you're not sure what you'd be agreeing to.
A personal loan with a cosigner adds a second person who promises to repay the loan if the main borrower can't.
Once you understand how the promise works, you can decide with your eyes open, whether you're the one asking or the one being asked.
What a cosigner does on a personal loan
A cosigner agrees to pay back your personal loan if you can't. They sign the loan with you and take on the legal responsibility. They never touch the money. You get the funds; they get the obligation.
In plain English, a cosigner is a backup the lender can turn to if you stop paying. A strong cosigner lowers the lender's risk, which can help you get approved or land a lower rate than you'd get on your own.
Not every lender allows a cosigner, and the ones that do set their own rules.
Cosigner vs. co-borrower: what's the difference?
A cosigner and a co-borrower play different roles, and the difference decides who owes what.
A co-borrower applies for the loan with you. Both names are on the loan, both of you can use the money, and both of you owe the full balance. Couples often borrow this way for a shared goal.
A cosigner is different. They take on the legal liability if you default. They never get access to the funds. Think of a co-borrower as a partner in the loan and a cosigner as a backstop for it.
Some lenders use "co-applicant" or "joint applicant" to mean what is effectively a co-borrower. The label changes; the arrangement is the same.
Getting this right prevents a painful surprise later. A cosigner who expects to share the money is in for a shock. So is a co-borrower who thinks they're off the hook once you start paying.
Cosigner and joint-applicant rules vary by lender. Some lenders allow joint applications (LendingClub, Prosper, Achieve, OneMain—joint, not cosigner); others don't (Discover, Upstart, Avant, Wells Fargo, LendingPoint). Check the lender's eligibility page.
| Cosigner | Co-borrower | |
|---|---|---|
| Gets the loan money? | No, never receives the funds | Yes, can use the funds |
| Liable for repayment? | Yes, the full balance if the borrower defaults | Yes, the full balance, shared from the start |
| Shows on their credit report? | Yes, the loan and its payment history | Yes, the loan and its payment history |
| Typical use | Backing someone with thin or weak credit | A shared purchase or goal, often couples |
Some lenders use "co-applicant" or "joint applicant" for what is effectively the same arrangement as a co-borrower.
When using a cosigner makes sense
A cosigner makes the most sense when your own application is what's holding you back. A few common situations:
- You're new to credit. With a thin file (little or no borrowing history), lenders don't have much to judge you on. A cosigner with an established record fills that gap.
- Your credit is bruised. As the CFPB frames risk, lenders generally treat sub-620 credit scores as higher risk. A strong cosigner can offset a low score.
- Your debt-to-income ratio is high. If you already carry a lot of monthly debt, a cosigner's income can help the numbers work.
- You'd be eligible alone, but want a better rate. Sometimes the math favors cosigning even when you don't strictly need it.
Run one worth-it test before you ask anyone. If the best loan you can get with a cosigner still sits above the 36% affordability ceiling, a cosigner isn't enough. Loans above 36% APR are widely considered predatory by consumer-protection groups. Keep looking instead.
Risks of cosigning a personal loan
If you're the one being asked to cosign, this part is for you. Cosigning is not a character reference. It's a financial and legal commitment with serious downside.
- You owe the full balance if the borrower stops paying. The FTC states it plainly: "The creditor can collect this debt from you without first trying to collect from the borrower." The lender does not have to chase the borrower first. It can come straight to you.
- The loan lands on your credit reports, good and bad. On-time payments can help both of you. "Any missed payments could also appear on your credit reports and impact your credit scores, making it harder for you to get credit in the future." (CFPB) A missed payment typically affects credit reports once the lender reports it and the payment is past due—usually after 30 days.
- It can shrink your own borrowing power. A cosigned loan can count toward the cosigner's debt-to-income ratio, which could make it harder for them to qualify for their own loan or mortgage later.
- You may not find out about trouble until it's late. Lenders are not required to notify cosigners of missed payments. A cosigner who wants to know about late payments has to ask the lender in writing to send statements or notify them.
- If the borrower stops paying entirely, the lender can take you to court for the balance.
Cosigner conversation checklist
| Talk through this before you cosign (or before you ask someone to) |
|---|
| ☐ The loan amount and the monthly payment |
| ☐ Who covers the payment if money runs short |
| ☐ That the cosigner owes the full balance if the borrower stops paying |
| ☐ How the cosigner finds out about a missed payment (the lender isn't required to tell them) |
| ☐ The exit plan: cosigner release or refinancing, and roughly when |
| ☐ What happens to the relationship if it goes wrong |
How to apply for a personal loan with a cosigner
Applying with a cosigner follows the same path as applying alone, with a few extra steps for the second person.
- Step 1: Confirm the lender allows cosigners. Not all do, so check before you both get attached to one lender. (Check the lender list above.)
- Step 2: Have the cosigner conversation first. Before anyone pulls credit, sit down together and talk through the loan amount, the monthly payment, the full legal liability, and your exit plan. If your cosigner hesitates, treat that as useful information, not a hurdle.
- Step 3: Prequalify together. Most lenders let you check estimated rates with both people's information up front. "Pre-qualification (or prescreening) is a soft credit inquiry. It does not affect your credit score and is not a guarantee of final approval."
- Step 4: Submit the full application. Both of you provide the standard documents: a government ID, proof of income, Social Security number, address, and recent bank statements.
- Step 5: Expect a hard credit pull for both of you at the end. A single hard inquiry usually costs each of you only a few points. The dip is temporary.
For the parts of the process that aren't specific to cosigning, like comparing lenders and choosing a term, read our guide on how to apply for a personal loan.
How to remove a cosigner from a loan later
A cosigner doesn't have to stay on the loan forever. You have a few ways to let them off the hook.
- Cosigner release. Some lenders offer cosigner release once the borrower has shown they can carry the loan on their own—terms vary by lender. Ask your lender whether it offers release and what it requires.
- Refinance into your own name. You take out a new loan on your own and use it to pay off the cosigned one. The old loan closes, and your cosigner is free. This is the cleanest exit once your credit has improved enough to be eligible on your own.
- Pay it off. The simplest release of all is the last payment.
Whichever route you take, tell your cosigner the plan up front.
Alternatives to getting a personal loan with a cosigner
You don't always need a cosigner. If you can't find one, here are other paths.
Secured personal loans. Most personal loans are unsecured, but secured options exist. Backing the loan with collateral, like a vehicle or a savings account, can make approval easier.
Credit-builder loans. Some lenders and credit unions offer credit-builder loans, which are small installment loans designed to help borrowers establish credit history. You build credit as you pay.
Build your credit first, then reapply. Start by reviewing your reports. AnnualCreditReport.com is the only federally authorized source for free annual credit reports from Equifax, Experian, and TransUnion. Fix errors, pay down balances, and give it some time before you reapply.
A loan from family. An informal loan can work. Put the terms in writing to protect the relationship.
Bills Action Plan
- Check your own credit first. Pull your free report at AnnualCreditReport.com, then prequalify with one lender on your own. It's a soft check that won't hurt your score even with weak credit, and the offers you get (or don't) tell you whether you can borrow alone or need a cosigner.
- Have the cosigner conversation before any soft pull. Talk through the loan amount, the monthly payment, the full legal liability, and your exit plan together. If they hesitate, that's information.
- Confirm the lender allows cosigners or joint applicants. Discover, Upstart, Avant, Wells Fargo, and LendingPoint don't. LendingClub, Prosper, Achieve, and OneMain accept joint applications.
Key Terms
Cosigner: Someone who promises to pay your loan back if you can't. They sign the paperwork and take the legal hit if you default, but they never get a cent of the loan.
Co-borrower (also called co-applicant or joint applicant): Someone who applies for the loan with you and shares both the money and the responsibility. Couples often co-borrow.
Joint and several liability: Legal wording that lets the lender collect the full amount from either person. The lender does not have to start with the main borrower.
Debt-to-income ratio (DTI): Your monthly debt payments divided by your monthly income, before taxes. Lenders use it to gauge whether you can handle another payment.
Cosigner release: A lender's process for taking a cosigner off the loan once the main borrower has shown they can carry it alone.
What credit score does a cosigner need for a personal loan?
Most lenders want at least good credit from a cosigner, meaning a FICO Score of 670 or higher. Some accept fair credit (a score of 580 to 669). A higher score brings more help. A cosigner with weak credit doesn't strengthen your application much.
Does cosigning hurt the cosigner's credit?
It can, in two ways. The hard inquiry at application may drop their score by a few points for a short time, and the new loan raises their debt-to-income ratio. After that, on-time payments could help their credit and late payments are likely to hurt it.
Can you remove a cosigner from a loan?
Sometimes. Some lenders offer cosigner release once the borrower has shown they can carry the loan on their own; terms vary by lender. The cleanest exit is to pay off the loan or refinance it into the borrower's name alone.
How much can I borrow with a personal loan and a cosigner?
That depends on the lender and on both applicants' combined credit and income. Personal loan amounts vary widely by lender, so compare a few.