Personal Loans With a Co-Signer in 2023

What’s the difference between a co-signer and a co-borrower?

Co-signers and co-borrowers have a similar effect on a personal loan application but different responsibilities for repaying the loan and accessing funds.

Co-signer: A co-signer vouches for someone else’s loan application and agrees to repay it if the borrower doesn’t. The co-signer can’t access the loan proceeds, nor can they see information about the loan, like how much you’ve repaid or if you missed a payment, says Massachusetts-based certified financial planner Therese Nicklas.

Co-borrower: A co-borrower is a partner applicant on a joint personal loan and shares responsibility for repayment. This person has equal access to loan funds and payment information.

How to get a personal loan with a co-signer or co-borrower

Here are the steps to get a personal loan with a co-applicant.

1. Check both of your credit and financial information. The lender will weigh both applicants’ credit scores, incomes and debt-to-income ratios. Familiarize yourself with this information to set expectations before applying.

2. Compare lenders. Some lenders have specific requirements for joint loan applicants, while a co-signer is typically expected to have better credit and income than the primary borrower. Compare qualification criteria and loan features from multiple lenders to choose one that best meets your needs. 

3. Pre-qualify and add a co-applicant. The pre-qualification process is different for joint and co-signed loans. Joint loan applicants can often pre-qualify together to preview potential rates and loan amounts. Co-signed loan applicants typically must pre-qualify by themselves with an online lender and, depending on the results, a lender may provide a co-signed loan option. For bank and credit union loans, both borrowers may be required to apply over the phone or in person.

4. Submit your application and get funded. Once you submit an application, the lender will do a hard credit check on you and your co-applicant. If approved, expect to receive your funds within a few days. Keep in mind that a co-signer can’t access the loan funds or payment information, while a joint borrower can.

» Get started: Pre-qualify on NerdWallet

When is a co-signer a good idea?

Lenders use information like your credit and income to decide whether you qualify and what your loan amount and annual percentage rate should be. Adding someone with better credit, higher income and low debt to support your application makes a lender more confident that the loan will be repaid.

A co-signer can help if:

• You have bad credit. There are personal loans for bad credit, but few lenders approve applicants with credit scores below 600. If that’s you, a co-applicant with better credit could increase your approval odds.

• You want a larger loan. Lenders offer the largest loans to well-qualified applicants, so including a co-applicant could increase the size of your loan.

• You need a lower rate. Since the APR affects your monthly payments, adding someone to the application could get you a lower rate, meaning a less expensive loan.

» MORE: See your bad-credit loan options

How much a co-signer or co-borrower helps depends on factors such as:

• The co-applicant’s credit score.

• Both your credit histories.

• Your combined debt-to-income ratio.

• The lender’s underwriting criteria.

Risks of adding a co-signer

It’s important for you and your co-applicant to understand the risks of co-signing before submitting an application. These can include: