Personal Loans with Cosigners: Everything You Need to Know

What is a Personal Loan with a Cosigner?

A personal loan with a cosigner is a type of loan where someone with stronger credit agrees to be equally responsible for repaying the debt along with the primary borrower. Adding a cosigner can help borrowers qualify for better rates or larger loan amounts, especially if they have limited credit history or a low credit score.

With a cosigned personal loan, the cosigner is legally obligated to repay the loan if the primary borrower cannot make payments. This reduces the risk for lenders, making them more likely to approve the loan application or offer more favorable terms.

Benefits of Getting a Personal Loan with a Cosigner

There are several potential advantages to applying for a personal loan with a cosigner:

Higher chances of approval
Lower interest rates
Larger loan amounts
Build credit history
Potentially qualify with limited credit history

According to a LendingTree study, borrowers who used a cosigner saw an average interest rate reduction of 2.36 percentage points. This can translate to significant savings over the life of the loan.

How Cosigned Personal Loans Work

The process for getting a personal loan with a cosigner typically follows these steps:

Primary borrower applies for the loan and adds a cosigner
Lender evaluates both applicants’ credit and finances
If approved, both parties sign the loan agreement
Funds are disbursed to the primary borrower
Both borrower and cosigner are responsible for repayment

It’s important to note that the cosigner does not receive any of the loan funds or have access to the money. Their role is solely to back up the loan with their own credit and income.

Who Can Be a Cosigner on a Personal Loan?

Common cosigners for personal loans include:

Parents
Siblings
Other close relatives
Spouses or partners
Close friends

The ideal cosigner has strong credit (usually 700+), stable income, and a low debt-to-income ratio. Lenders will evaluate the cosigner’s creditworthiness just as thoroughly as the primary borrower’s.

Pros and Cons of Cosigning a Personal Loan

Pros	Cons
Help a loved one qualify for a loan	Responsible for repayment if borrower can’t pay
May improve cosigner’s credit mix	Could negatively impact credit if payments are missed
Potential to strengthen relationship	May strain relationship if borrower defaults
No fees to cosign (typically)	Harder to qualify for other loans while cosigning

Risks of Cosigning a Personal Loan

While cosigning can help someone obtain needed financing, it does come with significant risks for the cosigner:

Full legal responsibility: The cosigner is equally liable for repaying 100% of the loan balance.
Credit score impact: Late payments or defaults will damage the cosigner’s credit.
Debt-to-income ratio increase: The loan balance counts towards the cosigner’s total debt load.
Difficulty removing cosigner: It can be challenging to be released as a cosigner once the loan is active.
Potential collections/lawsuits: The lender can pursue the cosigner for repayment through collections or legal action.

According to a Credit Karma survey, 38% of cosigners ended up having to make payments on a loan they cosigned. This highlights the very real financial risks involved.

Alternatives to Cosigning a Personal Loan

If you’re hesitant to cosign a personal loan, there are some alternatives to consider:

For the borrower:

Work on improving credit score before applying
Look into secured personal loans
Consider a credit-builder loan
Explore peer-to-peer lending platforms
Look into government assistance programs

For the potential cosigner:

Offer a cash gift instead of cosigning
Help the borrower create a budget and savings plan
Assist with finding alternative funding sources
Consider being a reference rather than a cosigner

How to Get a Personal Loan with a Cosigner

If you’ve decided that a cosigned personal loan is the right choice, here are the steps to apply:

Check your credit: Review your credit reports and scores to see where you stand.
Compare lenders: Research lenders that allow cosigners and offer competitive rates.
Get prequalified: See estimated rates and terms you may qualify for.
Choose a cosigner: Select someone with strong credit who is willing to cosign.
Gather documents: Collect pay stubs, tax returns, bank statements, etc.
Apply together: Complete the full application with your cosigner.
Review and accept: Carefully review loan terms before accepting.

Best Personal Loan Lenders That Allow Cosigners

While not all lenders offer cosigned personal loans, here are some top options to consider:

Lender	APR Range	Loan Amounts	Min. Credit Score
LightStream	6.49% – 23.99% with autopay	$5,000 – $100,000	660
SoFi	8.99% – 25.81% with autopay	$5,000 – $100,000	680
Upgrade	8.49% – 35.99%	$1,000 – $50,000	580
Prosper	8.95% – 35.99%	$2,000 – $50,000	640

Rates current as of June 2025. Check lender websites for most up-to-date information.

Frequently Asked Questions

Does a cosigner have to make payments?

No, the cosigner does not need to actively manage loan payments unless the primary borrower defaults. However, they are legally required to pay back any missed or unpaid amounts.

This is why it’s so crucial for both parties to fully understand all aspects of a cosigned personal loan agreement before committing.

Can a cosigner be removed from a personal loan?

It can be difficult but not impossible to have the cosigner released. Options include refinancing with only one party’s credit or waiting until the balance is low enough for just the borrower to qualify on their own.

Talk to your lender about any potential options, and review all requirements carefully.

How does a personal loan affect my cosigner’s credit?

The loan will appear on the cosigner’s credit report as well. On-time payments can help build positive payment history for them too.

If there are late or missed payments, this could negatively impact both parties’ credit scores.