A personal loan is one of many different loans available, and this type of loan is typically an unsecured one. This means that no collateral is necessary when getting it. To get a personal loan, though, you would need to have good credit. If your credit is not so great, you might still be able to get one if you use a cosigner.
What is a cosigner?
If you have never heard of the term "cosigner" or used one before, you might want to start by learning and understanding what a cosigner is. A cosigner, in terms of loans, is a person who is willing to sign for a loan on behalf of someone else. The person signing as a cosigner takes on the responsibility of paying for the loan if the person who took the loan defaults. When a loan has a cosigner on it, the loan is also likely to appear on his or her credit reports too. A cosigner is not the person borrowing the money but has all the same responsibilities as the borrower.
How does using a cosigner improve your chances of getting approved?
The reason people use cosigners is for their credit. When a person needs to borrow money but has a low credit score, this person could use a cosigner to get the loan. In this case, the bank would base the creditworthiness on the credit score of the cosigner and not necessarily on the credit score of the actual borrower. This means that if you do not qualify for a personal loan on your own, you might qualify if you can find a person who has great credit and is willing to be your cosigner on the loan.
What are the risks of using a cosigner?
There are risks for the person who is the cosigner of the loan, and the main one is that he or she will have to pay the loan if the borrower does not. The other risk is that the cosigner's credit could be negatively impacted by the loan if the borrower fails to make the payments and does not notify the cosigner about this.
If you need cash and are considering a personal loan, you might want to find a cosigner before you apply for the loan just in case you need one. To apply or learn more, talk to a lender that offers personal loans.