Best Personal Loans With a Cosigner

If you’ve been denied a personal loan before or want a lower interest rate, applying for a personal loan with a cosigner or a co-borrower could help. A cosigner serves as a guarantor on the loan — in other words, your cosigner promises to step in and cover the loan if you stop making payments. A co-borrower applies as a joint applicant on the loan, shares in repayment, and has equal access to the loan funds.

Only a handful of lenders offer personal loans with a cosigner, which is why we've expanded this list to include lenders that consider joint applicants.

Best personal loans with a cosigner or co-borrower

What is a cosigner?

A cosigner is someone who guarantees your loan. Ideally, they have a good credit score, low debt, and a solid income. They’re often a family member or close friend. The lender considers their credit and financial profile along with yours when making a lending decision and choosing what rate and loan terms to offer. But even though their name is on the loan, they don’t benefit from the loan funds — those go to you. 

While a cosigner can help you get a lower interest rate or qualify for a personal loan, they put their credit on the line to do so. What that means is that if you don’t make payments, your cosigner is obligated to make them for you. Plus, late and missed payments will hurt your cosigner’s credit score, as would defaulting on the loan. Cosigning also means the lender can pursue your cosigner for nonpayment (along with you). 

Cosigner vs. co-borrower

A cosigner and a co-borrower are two different things. A co-borrower, also known as a co-applicant, is someone who applies for a loan with you but shares equally in the loan proceeds. For instance, you might apply for a loan with your partner and have the money deposited into a joint checking account. Like a cosigner, their credit and financial profile are considered by the lender when weighing whether to extend a loan offer and at what rate and terms. Loans with a co-borrower are called joint personal loans.

How much can you save with a cosigner?

With cosigned personal loans, lenders typically consider your own creditworthiness — including credit score, income, debt-to-income ratio, and overall credit history — and the creditworthiness of your cosigner. The better your combined qualifications, the lower your interest rate could be.

But in general, you could potentially shave a few percentage points off your APR or get a loan without an origination fee. Plus, you might improve your credit enough by making timely payments on the new loan to qualify for a low interest rate on your own in the future.

First, if you’re able to prequalify for a loan without a cosigner, compare the APR on your prequalification quotes to the APR you might get with a cosigner. Note that you’ll have to reach out directly to lenders that allow cosigners to get a quote. 

Once you have these numbers, you can use a personal loan calculator to estimate how much you might save. For example, if you prequalify for a 33% interest rate on your own vs 28% with a cosigner, and you want to borrow $5,000 with a five-year term, you could save over $900 and have a lower monthly payment. 

Example:

What are the risks of using a cosigner?

Getting a loan with a cosigner involves a number of risks. 

1. Could damage your relationship: Entering into a contractually binding contract could potentially damage your relationship even if you make loan payments on time. 
2. Potential credit damage to both parties: If you miss payments or make them late, your cosigner’s credit score will suffer along with yours.
3. Increased DTI for both parties: The added debt and associated monthly payment would increase the debt-to-income ratio for both you and your cosigner, which could make it harder to get approved for additional credit. 
4. Little to no financial benefit for the cosigner: In most cases, the cosigner is doing you a favor by being on the loan. Make sure you’re both comfortable with that.
5. Initial hard credit inquiry with the application: Most lenders conduct a hard credit pull when you apply for a loan, which could ding both your and your cosigner’s credit scores. 
6. A long-term financial commitment: Personal loan terms typically range from 1 to 7 years. Make sure you’re both comfortable with being financially bound for the term of the loan.

Alternatives to cosigned personal loans

As there aren’t many lenders offering cosigned loans, it’s a good idea to be armed with a few alternatives.

• Payday alternative loans (PALs): PALs are available from participating federal credit unions and are designed for borrowers with fair and bad credit. Many credit unions won’t run a credit check and APRs are capped at 28%. Loans are available up to $2,000 with repayment terms up to 1 year.
• Credit builder loan: If you can wait for the money, a credit builder loan can be an effective way to improve your credit or build a credit history. A credit builder loan works in reverse. Instead of getting the loan proceeds upfront, you get the money after you’ve finished paying off the loan. Rates are typically well below 10% and loan terms often last up to two years (but can be shorter).
• Small bank loan: Some banks like U.S. Bank and Bank of America offer small loans (under or up to $1,000) to existing customers. Loans may not require a credit check and are typically paid back over a few monthly installments. Rates tend to be much lower than other small loan options. 
• Friends and family loan: If you’re already going to ask someone to cosign a loan for you, consider whether it makes sense for you to borrow from them instead. They could potentially benefit from interest income from you and from helping you out. Although you’d likely benefit from a much lower interest rate and better terms, note that loan payments wouldn’t be reported to the credit bureaus, so a friend or family loan won’t improve your credit. 
• 401(k) loan: A 401(k) loan is a way to borrow money from your retirement account — up to $50,000 or half of your vested balance, whichever is less. (If half your vested balance is less than $10,000, you may be able to borrow up to $10,000.) 401(k) loans don’t require a credit check and have low rates. Plus, the interest you pay goes into your account. However, they can be risky. The money you borrow will not be invested during the term of your loan, which could mean a significant loss of growth. Plus, if you can’t pay the loan back, it will be treated as a withdrawal, subject to income tax and early withdrawal penalties. Not all 401(k) plans allow loans.

Methodology

Credible evaluated 32 lenders across 1,216 data points to find the best personal loans with cosigners. We limited this list to lenders that allow cosigners or co-borrowers and evaluated them based on the following weighted categories:

• Rates and fees: 18.75%
• Eligibility and options for bad and no credit: 17.5%
• Availability: 12.5%
• Loan amounts and terms: 10%
• Customer satisfaction: 10%
• Customer service: 10%
• Efficiency and fund delivery: 10%
• Discounts: 7.5%
• Credible proprietary data: 3.75%

Credible’s team of experts gathered information from each lender’s website and from our partners directly. We also considered each of our partner lenders’ statistics over a 12-month period — including average funding times, average credit scores for approved applicants, and average rates. Each data point is verified by a senior editor to make sure it’s accurate at the time of publication. 

Learn more about how Credible rates lenders by exploring our personal loans lender rating methodology.

Disclosure: Some lending partners that participate in Credible’s comparison marketplace offer loans to borrowers with scores as low as 550. Borrowers with low scores will have fewer lending options than borrowers with higher credit scores.