Can you get a personal loan with a co-signer?

Can you get a personal loan with a co-signer?

When you apply for a personal loan, the lender will usually review your credit history and financial situation before deciding whether to give you the money.

The decision may be straightforward from the lender’s point of view if you have an excellent credit score and can prove you have a high income. But if your application doesn’t meet the lender's requirements, you may be able to increase your chances of getting a loan with a co-signer.

A co-signer essentially gives the lender someone else to turn to if you are unable to pay your loan back.

While not all lenders are in favour of applying with a co-signer, some will consider it. Read on to know how to get a personal loan with a co-signer.

Here’s how you can get a personal loan with a co-signer

A co-signer agrees with the lender that they will take on the loan repayments if you can no longer pay them.

At the time of your loan application, both you and the co-signer have to submit your personal and financial information for review. Generally speaking, the lender will be looking to make sure the co-signer has a good history of paying back loans on time.

How do I know I need a co-signer?

If you have a great credit score and a good income, you’re unlikely to need the help of a co-signer. However, there are certain situations where people tend to consider using a co-signer on a personal loan application:

  • When unemployed: If you depend on welfare or sources of income other than your own, a co-signer on your application could help fulfil the lender’s income requirements. Keep in mind, there are other options available for people who are unemployed and it could be worth looking to community organisations and Centrelink for other loan options. 
  • A credit score that is less-than-perfect: A co-signer with stronger credit may increase the chance of approval or attract more competitive rates.
  • Borrowing more: Sometimes people are limited in how much they can borrow alone, but can borrow more with a co-signer.

What are the benefits and drawbacks of applying with a co-signer?

There are certain advantages of applying for a personal loan with a co-signer, which include:

There is also a flipside to applying for a personal loan with a co-signer:

  • It can take longer for application and approval
  • You could still get rejected if their credit isn’t good enough
  • If you default, it could affect their credit too
  • Your co-signer’s ability to borrow may be affected in the future
  • The loan could put a strain on your relationship.

What should I look for before approaching a co-signer for a personal loan?

Your co-signer needs to meet certain criteria to be eligible to cosign.

  • Generally speaking, the higher their credit score, the better the chances.
  • A co-signer should have a job, be over 18 years of age and be an Australian citizen or permanent resident.
  • They should have enough money in their budget to make monthly repayments if you stop paying.
  • A co-signer with a high debt-to-income ratio may not be eligible to take on the responsibility of another loan.
  • Once they sign on to your debt, they might find it challenging to qualify for a loan of their own.
  • Joint applications can be risky, and it’s important to trust the co-signers, which is why many applications are with relatives or close friends of the borrower.

What must I consider before I can get a personal loan with a co-signer?

Cosigning on a loan is a big responsibility, and if you default on the payment, your co-signer becomes liable. Answer these three questions before applying for the personal loan with a co-signer.

  1. How much are you borrowing? A small loan may be more attractive to a co-signer because it’s easier for you to repay. Plus, their liability is lesser with a smaller loan.
  2. How often do you need to make payments? Be clear about the frequency and other terms of repayment. This will affect your co-signer in case you default.
  3. What is the loan for? Be upfront with your co-signer about why you’re taking out a loan.

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Learn more about personal loans

Can I include my spouse’s income on a personal loan?

If you apply for a joint personal loan with your spouse, you can include their income on the application. If approved, they then become jointly liable for the loan.

Both you and your spouse need to meet the eligibility criteria, such as income, age, and residency requirements, as stipulated by the lender. A joint loan could increase your chance of approval for a higher amount, as both borrowers’ incomes are assessed when determining borrowing capacity. 

Does refinancing a personal loan hurt your credit score?

Personal loan refinancing means taking out a new loan with more desirable terms in order to access a more competitive interest rate, longer loan term, better features, or even to consolidate debts.

In some situations, refinancing a personal loan can improve your credit score, while in others, it may have a negative impact. If you refinance multiple loans by consolidating these into one loan, it could improve your credit score as you’ll have only one outstanding debt liability. Your credit may also improve if you consistently pay the instalments on time.

However, applying to refinance with multiple lenders could negatively affect your credit if your applications are rejected. Also, if you delay or default the repayment, your credit score reduces.

What is a personal loan?

A personal loan sits somewhere between a home loan and a credit card loan. Unlike with a credit card, you need to sign a formal contract to access a personal loan. However, the process is easier and faster than taking out a mortgage.

Loan sizes typically range from several hundred dollars to tens of thousands of dollars, while loan terms usually run from one to five years. Personal loans are generally used to consolidate debts, pay emergency bills or fund one-off expenses like holidays.

How can I get a $3000 loan approved?

Responsible lenders don’t have guaranteed approval for personal loans and medium amount loans, as the lender will want to check that you can afford the loan repayments on your current income without ending up in financial hardship.

Having a good credit score can increase the likelihood of your personal loan application being approved. Bad credit borrowers who opt for a medium amount loan with no credit checks may need to prove they can afford the repayments on their current income. Centrelink payments may not count, so you should check with the lender prior to making an application.

Can I merge my personal loan with my home loan?

Yes, you can refinance your home loan and, in the process, merge or consolidate your personal loan and home loan. By doing so, you can lower the number of debts you have, and you may also reduce the total interest you have to pay.

However, you should consult a financial advisor or a mortgage broker to confirm that you are decreasing your total outstanding debt, including interest payments. The repayment term for a home loan can be much longer than that for a personal loan, and by merging the two, you could be repaying a higher amount over the full term.

How long does it take to get a student personal loan?

Completing an online personal loan application can often take anywhere from 10 minutes to 1 hour. Depending on your lender, processing your personal loan application may take anywhere between 1 and 24 hours. If your personal loan application is approved, you may receive the money in your bank account the following business day, or, in some cases, the same day.

What is a bad credit personal loan?

A bad credit personal loan is a personal loan designed for somebody with a bad credit history. This type of personal loan has higher interest rates than regular personal loans as well as higher fees.

Can I get a bad credit personal loan with a guarantor?

Some lenders will consider personal loan applications from a borrower with bad credit if the borrower has a family member with good credit willing to guarantee the loan (a guarantor).

If the borrower fails to pay back their personal loan, it will be their guarantor’s responsibility to cover the repayments.

Can you refinance a $5000 personal loan?

Much like home loans, many personal loans can be refinanced. This is where you replace your current personal loan with another personal loan, often from another lender and at a lower interest rate. Switching personal loans may let you enjoy more affordable repayments, or useful features and benefits.

If you have a $5000 personal loan as well as other debts, you may be able to use a debt consolidations personal loan to combine these debts into one, potentially saving you money and simplifying your repayments.

Can I repay a $3000 personal loan early?

If you receive a financial windfall (e.g. tax refund, inheritance, bonus), using some of this money to make extra repayments onto your personal loan or medium amount loan could help reduce the total interest you’re charged on your loan, or help clear your debt ahead of schedule.

Check your loan’s terms and conditions before paying extra onto your loan, as some lenders charge fees for making extra repayments, or early exit fees for clearing your debt ahead of the agreed term.

Is a personal loan a variable or fixed-rate loan?

Depending on the personal loan lender, you may be able to choose between a fixed and a variable interest rate. But, there are a few distinct differences between the two, so it’s important to weigh up the pros and cons before deciding on what’s right for you.

A fixed interest rate loan gets you the convenience of knowing exactly how much you need to repay each fortnight or month. On the other hand, you generally won’t be able to make lump sum or advanced payments to close your personal loan early - or at least not without a penalty.

With a variable interest rate personal loan, you may be able to get a longer loan repayment term, with the option of paying off the loan early. You typically won’t need to pay any additional charges for an early full repayment either. The potential disadvantage with an interest rate that can change is that your repayment is not entirely predictable, as it can fluctuate with the market. However, you’ll likely have more options as more lenders offer a variable interest rate personal loan.

How much can you borrow with a bad credit personal loan?

Borrowers who take out bad credit personal loans don’t just pay higher interest rates than on regular personal loans, they also get loaned less money. Each lender has its own policies and loan limits, but you’ll find it hard to get approved for a bad credit personal loan above $50,000.

Can unemployed single parents get personal loans?

It can be more difficult for unemployed borrowers to successfully apply for a personal loan. Most lenders require borrowers to have a regular income available to cover the cost of loan repayments.

If you’re self-employed, or if less than half of your income comes from Centrelink, you may not be eligible for some personal loan options. Consider contacting the lender before applying.

Can I get guaranteed approval for a bad credit personal loan?

Few, if any, lenders would be willing to give guaranteed approval for a bad credit personal loan. Borrowers with bad credit histories can have more complicated financial circumstances than other borrowers, so lenders will want time to study your application. 

It’s all about risk. When someone applies for a personal loan, the lender evaluates how likely that borrower would be to repay the money. Lenders are more willing to give personal loans to borrowers with good credit than bad credit because there’s a higher likelihood that the personal loan will be repaid. 

So a borrower with good credit is more likely to have a loan approved and to be approved faster, while a borrower with bad credit is less likely to have a loan approved and, if they are approved, may be approved slower.