Mammoth AwardsIn a perfect world, everyone would qualify for a loan to get the cash they need to cover expenses. That’s not the case, though, as getting a loan often requires good credit and sufficient income to repay what you’d like to borrow.
Does this mean you’re doomed when it comes to getting a loan if your credit is poor and you don’t make much money? Not necessarily, as a co-signer could be the missing ingredient for loan approval, even if your finances aren’t in order.
The Benefits Of A Co-Signer
A co-signer is someone who signs on a loan and backs the primary borrower. If the borrower fails to repay the loan, the co-signer must pick up the tab. And since the loan goes on both parties’ credit reports, the co-signer’s credit will be impacted by the borrower’s behavior. For instance, if the borrower makes timely payments on the loan, their credit score and the co-signer’s will be positively impacted. Conversely, both credit scores will be negatively impacted if the borrower fails to make timely payments.
The most obvious benefit of using a co-signer is that they can help you get approved for a loan if your credit score or income is low or you lack credit history. Where are co-signers commonly used? With student loans since many college applicants are young, lack credit history, and don’t make enough income to get approved for high-dollar loans. In fact, in 2019, MeasureOne estimated that 90 percent of private student loans involved co-signers.
Is A Co-Signer Right For You?
As mentioned, co-signers can come in handy if you’re having trouble getting a loan due to a lack of credit history, a low credit score, or insufficient income. Where can you find a co-signer? You’ll probably need to turn to your personal network of friends and family, as they will likely be the only ones willing to enter such a risky situation that comes with a ton of responsibility.
Not anyone can be a co-signer. To get approved for the loan, your co-signer should have better credit or make more income than you, as they will need to bolster your application. Before entering an agreement, the co-signer must also understand that they will be on the hook for the loan should you fail to repay it.
Alternatives To Co-Signers
If you cannot find a co-signer through your personal network, you will have to take other avenues to get the cash you need. Your first move could be asking friends and family to lend you the cash outright without applying for a loan. They may be more willing to do this than to co-sign since their credit won’t be at risk.
You could also apply to a credit union and see if they will accept you, as some are less strict than banks and other lenders. Speaking of other lenders, contact as many as possible until you find a fit. Some lenders bypass credit requirements or accept borrowers with bad credit. And if you still have no luck, look for lenders that offer secured loans backed by collateral. If you offer your car, property, or a savings account as collateral, that could help you get a loan.
