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Personal loans are a great tool for debt consolidation and financing big purchases. But unfortunately, not everyone can qualify for a personal loan at a reasonable interest rate, as these loans are available only to borrowers with a good credit score.
Fortunately, there is a way for you to qualify for reasonable loan rates: you can apply with a co-applicant who has a stronger credit profile than you.
This guide will explain what a co-applicant is, how getting co-applicant loans work, and review personal loans available to co-applicants.
On this page:
- What is a Co-Applicant?
- Where to Apply for Co-Applicant Loans
- Co-Applicant vs Co-Signer: What’s the Difference?
- Getting a Personal Loan with a Co-Applicant
What is a Co-Applicant?
A co-applicant is someone who applies for a loan with you and who shares legal responsibility for the loan that you’re taking out. Since you are both borrowing together, it usually makes sense for the co-borrower to also be apart of the goal you’re funding.
For example, if you and a roommate or partner own a house together and want to borrow to fix it up, you could be co-applicants on a personal loan to pay for home improvements.
Co-applicants will only help you to get approved for a loan with a reasonable interest rate if they have good credit and strong financial credentials. So, ideally, you should look for someone whose credit history and current income check those boxes.
Since you and the co-applicant will need to work together to repay the loan, the co-applicant should also be someone who you are close to, such as a friend or family member you’ll be in ongoing contact with as you jointly repay the debt.
If the co-applicant has better credit or a higher income than you, the co-applicant could significantly increase the chances you’ll be approved for a loan, could help you get a lower interest rate, and could help you to be approved to borrow more.
Where to Apply for Co-Applicant Loans
Not all lenders allow you to apply for a personal loan with a co-applicant. Here are two personal loan lenders that do accept joint applicants for financing.
|Company||Rates (APR)||Loan Amounts||Credit Score|
|LightStream||3.49% – 19.99%||$5,000 – $100,000||660+|
|Upgrade||7.99% – 35.97%||$1,000 – $35,000||620+|
3.49% – 19.99%
$5,000 – $100,000
LightStream is a great option if one or both of the co-applicants have a high credit score. LightStream will beat competitors’ interest rates by 0.10 percentage points, which adds up over time.
- Credit score category: Excellent, good
- Soft credit pull to check rates: Not available
- Deposit time: As soon as the same day
- Origination fee: 0%
- Late fee: None
- Discounts: 0.50% interest rate reduction for enrolling in autopay
- Repayment terms: 24 – 144 months
7.99% – 35.97%
$1,000 – $35,000
Upgrade is a great option for co-borrowers who need a smaller loan. Borrowers can check their interest rates without affecting their credit score. If approved, funds can be made available as soon as the next day.
- Credit score category: Fair, bad
- Soft credit pull to check rates: Yes
- Deposit time: As soon as the next day
- Origination fee: 2.9% – 8%
- Late fee: $10
- Repayment terms: 36 or 60 months
Co-Applicant vs Co-Signer: What’s the Difference?
Co-applicants and co-signers both make it easier for you to get approved for a loan, especially if your credit isn’t perfect or your other financial credentials are lacking. But loan co-signers and co-applicants have different roles to play, and they sign on to loans for different purposes.
When you get a personal loan with a co-signer, the co-signer is solely signing on to the loan to help with the approval process. The primary borrower is the one who needs to borrow the money and who, in most circumstances, is responsible for repaying the amount borrowed.
When you get a personal loan with a co-applicant, on the other hand, the co-applicant is taking on the debt with you. Generally, you will both want to borrow the money and will work together for repayment. The co-applicant is not signing on solely to help get loan approval but is instead eager to borrow jointly for his or her own purposes.
Getting a Personal Loan with a Co-Applicant
When you are deciding whether to get a personal loan with a co-applicant, there are some key things that you should think about before you move forward. Considerations include:
- How you can prove your reliability when asking someone to co-apply: Mixing personal finance with relationships can be messy. You’ll want to be sure the co-applicant trusts that you’ll be helpful in working to repay the loan.
- Your relationship to the co-applicant: You’ll share responsibility for repaying the loan, which could take several years. You want to be sure the co-applicant is someone you will still be in contact with throughout the loan repayment process and that you can work well together. You also don’t want the loan to add undue stress to your relationship if one of you defaults on the loan or makes a late payment.
- The co-applicant’s credit and finances: If the co-applicant has bad credit or a lot of existing debt from credit cards or other loans, then they may be a detriment to your loan application instead of helping you get approved.
>>Read More: Joint Personal Loans for Married Couples
The Benefits of Co-Applicant Loans
Some of the benefits to applying for a loan with a co-applicant include the following:
- If a co-applicant has better credit than you, they can help you get approved.
- You share responsibility for loan repayment, so if you’re borrowing for a project that benefits both of you, they’ll be legally obligated to uphold their side of the monthly payments.
- Combining your credit and income could help you get approved for a larger loan
The Downsides of Co-Applicant Loans
There are also some downsides to applying for a loan with a co-applicant, including the following:
- Your chances of loan approval could be hurt if the co-applicant doesn’t have credit as good as yours or if the co-applicant already owes a lot
- You could become responsible for the full loan amount if something happens and the co-applicant can’t keep up with their required loan payments
- Borrowing money with someone can strain your relationship
How to Apply for a Co-Applicant Personal Loan
Applying for a personal loan with a co-applicant follows basically the same application process as applying for a personal loan on your own—except you provide the personal information of both borrowers instead of one. Typically, you will need to provide details including:
- Your names, addresses, and Social Security numbers
- Your income
- Your outstanding debts
You may be asked to provide documentation, such as pay stubs, bank account statements, or tax returns, to verify your debt-to-income ratio, employment, and outstanding debts. And lenders will check the credit score and credit report of both applicants when deciding whether to make the loan.
>> Read more: How to Apply for a Personal Loan
Bottom Line: Should You Apply for a Personal Loan with a Co-Applicant?
Applying for a personal loan with a co-applicant makes a lot of sense if you and someone else you trust—with good credit—want to borrow together for a joint goal. Just be sure you understand that you’re both responsible for loan repayment and you discuss together how the loan will be paid off over time.
Once you are both on the same page, shop around to find the best personal loan for your needs.
Recap of Personal Loans for Co-Applicants
Author: Jeff Gitlen