Should you ask someone to co-sign your loan? Here’s what to know

Lenders consider your credit scores and income when evaluating your loan application. A poor or limited credit history could make it harder to get approved. Even if approved, you could pay higher interest rates or fees. Similarly, a low income or high debt levels could keep you from getting the loan you need.

If qualifying is a problem, you might be able to get a personal loan with a co-signer. Your co-signer's good credit and/or income could persuade the lender to approve you or offer you a lower rate.

However, it's a big ask to have someone co-sign a loan because they share responsibility for the debt. And you may not feel all that comfortable letting them know your credit or income isn't as great as you'd like it to be.

A personal loan with a co-signer works best when both sides understand their responsibilities, and there's mutual trust between them. Here's how co-signing works, the pros and cons of having a co-signer, and how to ask someone to co-sign a loan.

What it means to have a co-signer on a personal loan

What happens when someone co-signs a loan? To start with, that person agrees to let the lender check their credit and verify their income. If the application is approved, the co-signer agrees to share legal responsibility for the debt with you.

A co-signer guarantees repayment, but doesn't receive the loan funds or share access to them. That's what separates a co-signer from a co-borrower.

If you can't repay what you borrowed, the lender will expect your co-signer to pay. Co-signed loans also typically show up on both your credit reports.

As long as you make your payments on time, that could benefit your credit score and your co-signer's. On the other hand, if you miss a payment or default (the loan goes to collection), those negative marks could hurt your credit score—and your co-signer's.

Achieve is not a Credit Repair Organization and does not provide, or offer, services or advice to repair, modify, or improve your credit.

Who can co-sign a loan?

Anyone of legal age could potentially co-sign a loan, provided they have a solid credit history and income. However, a co-signer is usually someone you know well. For example, you might ask a parent or other relative to co-sign. Friends could also be co-signers. Your comfort level with talking about your credit will likely play a part in who you decide to ask.

When you're deciding who to ask, weigh a few qualities:

• A strong credit history that reassures the lender.

• Steady income that could cover payments if you ever fall short.

• A trusting, open relationship where talking about money feels comfortable.

When asking for a co-signer might make sense

Should you ask someone to co-sign your personal loan? A co-signer could help you qualify or get a better rate, but it’s a serious, shared responsibility. It's usually best to only ask someone if you’re absolutely confident you can make on-time payments for the entire life of the loan.

So, when should you get a co-signer for a personal loan? It might make sense to ask someone to co-sign if you have fair credit or limited credit, but your income is steady and stable. It's best in situations where you know you can afford the payments, but you need a little help to qualify for the loan because of your credit.

Lenders use your credit scores to gauge how you manage debt, but they also want to know you have the money to make loan payments consistently each month. A higher income and a co-signer on board could help to offset a lower credit score.

When you might want to think twice about asking someone to co-sign your personal loan

You should pass on getting a personal loan with a co-signer if there's any chance you won't be able to keep up with the payments. For example, if your income is unsteady or you're struggling with other debt payments, adding a co-signed loan could make things worse.

What are the disadvantages of having a co-signer?

If you ask a friend or family member to co-sign a loan, you might be risking your relationship. The request could make things awkward if they don't want to say yes.

For those who do say yes, co-signed loans typically show up on both credit reports. As such, co-signing for a loan could make it harder for your co-signer to get a mortgage or other financing in the future.

If you miss a payment, your co-signer's credit might be damaged as well as yours. If you can't pay the loan as agreed, the lender could start collection actions against you and your co-signer. You could both be sued for the debt. Even if you're not sued, both your credit scores could take a hit if the lender reports the account as delinquent.

All of that might harm your relationship with your co-signer. A personal loan with a co-signer could solve some short-term financial problems. But missing payments might also mean the end of a relationship with a loved one. Carefully consider the nature of your relationship with this person and how co-signing might impact them before asking.

How to talk about co-signing responsibly

If you have someone in mind to co-sign a personal loan, sit down with them and talk things through. Explain to them that if they agree, they'll be equally responsible for the debt, even if you're the only one making payments. Go over the impact on their credit scores and what could happen if you can't pay the loan for any reason.

• Pick a good time to talk, so the person can weigh your request without feeling rushed.

• Explain what the loan is for and why you need a co-signer, so they understand your situation.

• Walk through the responsibilities and credit impact, so they know a co-signer guarantees repayment and that missed payments affect both credit scores.

• Share your repayment plan and offer a written agreement, so they can see you're serious.

• Offer to set them up with payment notifications so they know when it's due each month and when it's been paid.

• Give them room to decide, and be a good sport if they say no.

You might offer to draft a written repayment agreement that details what you'll pay. It won't override the agreement with the lender, but it could give your co-signer some reassurance that you're serious about repaying the loan.

You could also look into ways to take them off the loan after you're approved. This is called a co-signer release, but it's rare to find lenders willing to offer them for personal loans.

Can I remove a co-signer from a loan?

Very few lenders will release a co-signer from a personal loan because it increases their risk and gains them nothing. The rate and terms you were given were based on the qualifications of the co-signer, not just you.

If your credit and/or income have improved, you can apply to refinance the loan in your own name. Another option is to have the co-signer pay off your loan and become the lender for the remaining balance. In that case, you'd make your payments to your co-signer until the balance is cleared.

Alternatives to using a co-signer

If you can't find someone who will agree to co-sign or you don't want to put that responsibility on anyone else, you could look into other options to borrow.

For example, you might apply for a secured loan. Secured loans require you to pledge collateral, which is something of value that you own. This might be a piece of land, a car, or a bank account. If you don't repay the loan, the lender gets to keep your collateral.

A secured loan reduces risk for the lender, which could make it easier for you to get approved. You might also get a lower interest rate on a secured loan vs. an unsecured loan.

Personal loans for bad credit are another option, because their lenders tend to accept borrowers with lower credit scores. However, the rates and fees are generally higher.

If you don't need to borrow right away, work on your credit score to improve it. Some of the best ways to boost your score include paying bills on time and paying down existing debts. If you raise your score enough, you might not need a co-signer at all when you're ready to borrow.

Achieve is not a Credit Repair Organization and does not provide, or offer, services or advice to repair, modify, or improve your credit.

Choose a financial path with confidence

A personal loan with a co-signer could help you move forward financially. It's okay to ask for help when you need it, as long as you do it wisely and both of you understand what you're agreeing to from the start.

Before you approach a co-signer, check your rate with Achieve Personal Loans to find out if you qualify by yourself. It won't affect your credit, and you could get a decision in minutes.