Co-Signed Loans

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In any loan agreement, both the lender and the borrower are looking for the best deal. Co-signing can help borrowers get the loan they want, while assuring the lender that they’ll get their loan amount back.

Co-signed loans are an excellent choice for young adults who haven’t had time to build their credit history, or for any other borrower who doesn’t have a perfect credit score. Finding a co-signer could help you secure a loan with better terms, lower interest, and more money.

What Are Co-Signed Loans?

A co-signed loan requires a third party to sign onto the installment loan, to insure that if the borrower can’t repay the loan, the co-signer will. You can include a co-signer on most loans, including: mortgages, auto loans, student loans, personal loans, and more.

A co-signer is a person who signs a contract alongside the primary borrower, and agrees to continue paying the loan amount if the primary borrower defaults. Being a co-signer is a big responsibility, and it requires serious consideration before becoming one, or asking someone to be one.

Co-signing somebody’s loan is not simply a letter of recommendation; you are responsible for that loan. If the borrower can’t make payments or defaults, the co-signer has to repay the loan.

How Do Cosign Loans Work?

A co-signed loan is the same as any other loan in terms of applying. You’ll fill out an application that will vary depending on the type of loan and the lender. Then the co-signer will also need to fill out paperwork. Most loans can include a co-signer, but the process is different if you’re taking out a mortgage, personal loan, or other types of loans.

Depending on the loan, lenders perform soft or hard credit checks of both the borrowers and co-signers. If you haven’t been able to secure a loan before, having a co-signer with a good credit score can increase your chances of approval.

Having a co-signer with a good credit history can help you secure a loan, and receive a better offer from the lender. After the approval of your co-signed loan, you need to pay it back based on the repayment terms agreed upon. Most co-signed loans are in the form of an installment loan, where you have to make monthly payments.

Missing payments can impact the credit score of both the borrower and co-signer. Regular payments, on the other hand, may build the credit scores of both parties.

How to Find a Good Co-Signer?

Most people look for a co-signer among their close friends and family members. If you’re considering taking out a co-signed loan, keep in mind that lenders will check not only yours but also your co-signer’s creditworthiness.

If you don’t have a credit history or have a low credit score, getting a co-signer can help. You should choose someone with an excellent credit score and a history of making payments on time. Parents often co-sign their children’s credit cards and personal loans to help them develop a credit history.

The Bottom Line

Co-signed loans are an excellent borrowing choice if you’re having trouble securing a loan on your own. Getting a good co-signer increases your chances of getting a loan with good interest rates and higher available loan amounts, and makes it easier to get approved for a loan.

If you don’t want to use a co-signer, other alternative borrowing options are available, such as CreditNinja. CreditNinja offers personal loans without the hassle of getting a co-signer. To see if you qualify for a loan, Apply today and get your finances back on track.

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