Should I use a cosigner for my bad credit loan

By Matt Mayerle
Modified on June 6, 2023
bad credit loan cosigner

Applying for a new loan or line of credit can sometimes be a stressful and overwhelming process. If you aren’t familiar with what to watch out for and the best questions to ask, then you could potentially get taken advantage of, or apply for a loan product that isn’t right for you. 

Knowing all the ins and outs of the personal loan process will be the key to getting the best loan for your situation. If you’re nervous about applying for a new loan, or you’re not sure you can even get approved for one, then you may be considering a cosigner

A cosigner is a common way that borrowers with poor credit can get approved for loan. But before choosing this option make sure you understand the pros and cons of using a cosigner for your loan. 

What is a cosigner?

A cosigner is essentially a third party that agrees to take on the responsibility of the loan, should you fail to make your payments. This person is usually someone close to you, either a friend or a family member, and they would likely need to have a better credit history than the person applying for the loan. 

The most important thing to remember when considering a cosigner, or if someone has asked you to be a cosigner, is that the cosigner takes on complete responsibility for the loan if the applicant can’t repay the loan. Whether they forget to make payments or they simply can’t afford it, as a cosigner you will be forced to make the payments for them. 

If the cosigner is forced to take over the loan payments it could strain the relationship you have with them. This is why many people would only use someone very close to them as a cosigner, like a parent or spouse. 

What is a bad credit loan?

A bad credit loan is any loan designed for borrowers with bad credit scores, or a poor borrowing history. These loans tend to be short-term, and depending on the loan and lender they can be quite expensive. 

Some common examples of bad credit loans include:

Payday loans—A payday loan is a short-term (usually two weeks) loan that borrowers use to help them stretch their money to their next payday. Because the borrowers who use them typically have poor credit, these loans tend to carry higher interest rates than some other personal loans

Personal Installment Loans—This is a good alternative to other short-term options like title loans or pawn shop loans. Personal installment loans usually allow borrowers to get more money than other personal loans as well, sometimes ranging up to a few thousand dollars. The great thing about these is that you can repay them through monthly installments, over a longer amount of time (sometimes up to a couple of years). 

Title Loans—A title loan is a secured loan, meaning that in order to get one you’ll be required to offer up collateral. The collateral in this case would be your vehicle’s title. The lender would assess the value of your vehicle and offer you a loan that equals a fraction of the value. You would then offer up your title, and they would give you the cash. Once you pay it off you’ll get your title back, but if you can’t repay the loan they have the right to seize your vehicle and sell it. 

Do I need a cosigner?

Now that you’re familiar with what cosigners and bad credit loans are, it’s time to answer the big question: is a cosigner the right choice for you?

Unfortunately there is no right or wrong answer to this question. Whether or not you should get a cosigner will largely depend on your specific financial situation. If you have a friend or relative that you’re close with, who has great credit and is willing to help you, then it may be a good option. Just be sure to make your payments so you don’t hurt your credit even further, and strain your relationship with the cosigner. 

Many people choose to acquire a cosigner if they aren’t able to get approved for a good loan because of their credit score. If this is the case for you, make sure to explore all of your options before opting for a cosigner. 

CreditNinja offers better personal installment loans for borrowers with less-than-perfect credit, so you won’t have to worry about finding a cosigner. Apply online today for a CreditNinja personal installment loan, and get the cash you need to get back on track.

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