A co-sign loan may be an option for borrowers who don’t qualify for a loan on their own. Adding a co-signer’s credit history and income to a loan application can increase your chances of qualifying and get you more favorable terms.
Here’s what to know and where to find co-sign personal loans:
- What is a co-sign loan? Your co-signer takes on equal responsibility for the loan.
- Banks and credit unions: A few major banks and credit unions offer co-sign loans.
- Online lenders: A handful of online lenders allow for co-signers, with loans ranging from $1,000 to $100,000.
- How a co-signer can help: You may qualify for a loan you wouldn’t get on your own and get a lower rate.
- Is a co-signer the right option? Know the risks to co-signing a loan, such as the potential impact to your credit scores.
Here are typical annual percentage rates for some lenders that let you apply with a co-signer.
|Typical APR range||Loan amounts|
|LightStream||3.09% to 14.24% with AutoPay; 3.59% to 14.74% without AutoPay||$5,000 - $100,000|
|Backed||2.90% - 15.99%||$3,000 - $25,000|
|LendingClub||6.16% - 35.89%||$1,000 - $40,000|
|Wells Fargo||6.99% - 23.99%||$3,000 - $100,000|
|FreedomPlus||7.93% - 29.99%||$10,000 - $35,000|
|OneMain Financial||17.59% - 35.99%||$1,500 - $25,000|
|Mariner Finance||24.00% - 36.00%||$1,000 - $25,000|
What is a co-sign loan?
As its name suggests, a co-signed loan has two signatures: yours and the co-signer’s, who acts as a form of insurance for the lender, promising to pay the loan amount if you default.
If you miss a payment, you risk hurting both your credit score and that of the co-signer. You can also ruin your relationship with the co-signer. Co-signers take on equal responsibility for the loan.
Banks and credit unions that allow co-signers
Most major banks no longer offer personal loans, but Wells Fargo and Citibank still do. Both banks have the option of adding a co-signer. You need to be an existing customer to apply, and you must visit a Wells Fargo or Citibank branch to complete the paperwork for the loan.
Credit unions are a good first stop for any type of personal loan, because they have low interest rates and often work with borrowers to make a loan affordable, even if the borrower has bad credit. Most credit unions allow co-signers on unsecured loans (also called signature loans) and accept online applications. The maximum APR that federal credit unions can charge is 18%.
Online lenders that allow co-signers
A handful of online lenders let borrowers add a co-signer.
Lightstream: Loans for co-signers with excellent credit
LightStream, a lender with high credit standards, allows joint applications. The company looks at combined income and debt to check whether borrowers meet its underwriting requirements. But only one of the applicants needs to have excellent credit to qualify for a loan, according to Todd Nelson, LightStream’s business development officer.
•APR: 3.09% to 14.24% with AutoPay; 3.59% to 14.74% without AutoPay
•Loan amount: $5,000 - $100,000
•Loan terms: 2 to 7 years
•Minimum credit score: 660
•Time to funding: As soon as the same day
FreedomPlus: Rewards co-signers with good credit
FreedomPlus gives borrowers a lower interest rate if they add a co-signer with good credit. For example, if you initially qualify for a loan at 15.99% APR, adding a co-signer might discount that rate to 10.99%. Forty percent of FreedomPlus borrowers have co-signers, according to the company.
•APR: 4.99% - 29.99% fixed
•Loan amount: $10,000 - $35,000
•Loan terms: 2 to 5 years
•Minimum credit score: 640, but generally 700+
•Time to funding: As soon as 2 days
•Fees: Origination fee of 0% to 5% of loan amount; fees for late payment, unsuccessful payment and personal check use
Backed: Low rates for well-qualified co-signers
Backed’s starting interest rates are among the lowest of online lenders, and it encourages millennial borrowers with thin credit to have a friend or family member “back” them on a personal loan. If your co-signer earns at least $50,000 and has a credit score of 720 or higher, Backed may be a good fit.
Backed currently operates only in Arizona, Arkansas, Florida, New Jersey, New York and West Virginia.
•APR: 2.9% - 15.99%
•Loan amount: $3,000 - $25,000
•Loan terms: 1 to 3 years
•Minimum credit score: 660 without co-signer, 720 for co-signer
•Time to funding: 2 to 4 business days
•Fees: Origination fee of 0.8% to 2.0% of loan amount. Fees for late payment, unsuccessful payment, personal check use
LendingClub: Peer-to-peer loans for joint borrowers
LendingClub, a large online lender, allows joint applications. The marketplace lender allows a maximum combined debt-to-income ratio of 35% for joint applications. One borrower must have a minimum score of 600 or above, while the second borrower can have a credit score as low as 540.
•APR: 6.16% - 35.89%
•Loan amount: $1,000 - $40,000
•Loan terms: 3 or 5 years
•Minimum credit score: 600, but borrowers average 699
•Time to funding: Usually 7 days
•Fees: Origination fee of 1% - 6% of loan amount; fees for late payment, unsuccessful payment and personal check use
OneMain Financial and Mariner Finance: Co-signer loans for bad credit
OneMain Financial makes loans to people with below average or bad credit and allows joint applications. OneMain has no minimum credit score requirement and offers same-day funding. You can start your application online, but to complete the process OneMain usually requires a visit to one of its more than 1,700 branches.
Mariner Finance has a low minimum credit score requirement of 600 and lets applicants use a co-signer to boost their approval odds. Mariner also considers applicants who have filed bankruptcy. Mariner has branches in more than 20 states and requires an in-person visit to complete the loan application process. (Its subsidiary, Pioneer Credit, has branches in eight states.)
• APRs: 17.59%-35.99%
• Loan amount: $1,500-$25,000
• Loan terms: 1 to 5 years
• Minimum credit score: None, but borrowers average 600 to 650
• Time to funding: Same day to up to three days
• Fees: Origination and late fees; both vary by state
• APRs: 24.00%-36.00%
• Loan amount: $1,000 to $25,000
• Loan terms: 1 to 5 years
• Minimum credit score: 600
• Time to funding: Typically one day
• Fees: Origination fee, late fee, personal check fee and returned payment fee vary by state
How a co-signer can help
For those with bad credit, the benefits of a co-signer can be significant. You may qualify for a loan you wouldn’t get on your own, and your interest rate and origination fee will be lower.
How much your rate falls depends on factors such as:
- The co-signer’s credit score
- Both your credit histories
- Your combined debt-to-income ratio
- The lender’s underwriting criteria
In an example of a real loan provided by FreedomPlus, a borrower with a FICO score of 630 and annual income of $30,000 was approved for a three-year, $10,000 loan with an interest rate of 18.49%. After adding a co-signer with a 720 credit score and annual income of $70,000, the interest rate dropped 10 percentage points.
|APR||Monthly payment||Total cost|
The borrower saved more than $1,700 over the life of the loan with the addition of a co-signer. (This pricing example doesn’t include fees.)
Is a co-signer the right option?
There are benefits and risks to co-signing a loan. Whether you’re the borrower or co-signer, understand co-signer responsibilities before you consider a joint personal loan.
You can check your interest rate without affecting either your credit or the co-signer’s credit at the time of application, but all lenders conduct a hard credit check on both applicants before they issue the loan. (A hard check affects your credit score.)
Lenders report positive and negative payment information to the credit bureaus, which has an impact on both your credit and, if you default, the co-signer’s.
As with all loans, the credit of both parties will improve with timely payments or suffer because of missed payments. Lenders aren’t required to keep co-signers in the loop, so it’s usually up to the co-signer to ensure that the borrower is making regular payments.
Next steps: Check rates on loans
First, check multiple lenders to see if you pre-qualify for a loan on your own and, if so, at what rate. If you don’t qualify, or if your rate is high, consider a co-signer loan.
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