Should You Apply for a Personal Loan With a Co-Applicant?

Personal loans are a great tool for debt consolidation and financing big purchases. However, not everyone can qualify for a personal loan with a single-digit interest rate, which is typically reserved for borrowers with credit scores of 670 or higher.

There is a way to qualify for reasonable loan rates with less-than-stellar credit, however: apply with a co-applicant who has a stronger credit profile than you.

This guide will explain what a co-applicant is and how getting one on your loan works. We’ll then discuss how to choose a co-applicant and the best options for co-applicant personal loans. 

What is a co-applicant on a personal loan?

A co-applicant applies for a loan with you and shares responsibility for the loan funds and repayment. When you apply for a personal loan with a co-applicant, the bank reviews your income and credit history and that of your co-applicant, and bases its approval on your combined creditworthiness.

Because you and the co-applicant must work together to repay the loan, the co-applicant should also be someone who you are close to, such as a friend, family member, or spouse 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 and could help you get a lower interest rate and higher loan amount.

What’s the difference between a co-applicant and a cosigner?

Co-applicants and cosigners can both increase your approval odds for a loan, but they serve different purposes:

	Co-applicant	Cosigner
Applies with you	✅	✅
Can increase approval odds	✅	✅
Responsible for making payments	✅	Only if you can’t
Co-ownership of loan proceeds	✅	❌

When you get a personal loan with a cosigner, the cosigner signs on to the loan solely to help you get approved. As the primary borrower, you are typically the only one who manages the loan funds and who is responsible for repaying the borrowed amount.

Meanwhile, a co-applicant takes on the debt with you. Typically, you borrow the money and take on repayment together. Your co-applicant also shares ownership rights, meaning the loan funds belong to both of you. That’s not the case with a cosigner.

How can you benefit from a co-applicant on your personal loan?

To understand the potential benefits a co-applicant can bring to your personal loan application, consider a scenario. 

You’re seeking a personal loan to fund a $30,000 kitchen renovation. On your own, your lender may offer you an interest rate of 12.5% due to your fair credit score and debt-to-income ratio and an amount that is less than the total you need for your project.

Your spouse, however, has a stable income, good credit history, and a vested interest in the home renovation. By adding your spouse as a co-applicant, you could secure a loan for the full amount at an interest rate closer to 7%, resulting in substantial savings over your loan term. 

In line with the example, the table below shows how a co-applicant can affect the rates and terms of a personal loan. These numbers were calculated using our personal loan calculator. 

	One borrower (fair credit)	With co-applicant (good credit)
Loan amount	$30,000	$30,000
Interest rate	12.25%	7%
Loan term	5 years	5 years
Monthly payment	$671	$594
Total interest paid	$10,268	$5,642
Total cost of the loan	$40,268	$35,462

Do you need a co-applicant on your loan application?

If you can’t qualify for a loan on your own, adding a co-applicant can make good sense. Additionally, a co-applicant rather than a cosigner makes sense when both parties want access to the money and the responsibility of repayment. 

Here are some questions to ask when deciding if a co-applicant is necessary for your loan application:

1. Can you afford the loan payments on your own? If you have a steady income and good credit, and you can comfortably make the loan payments without any help, you may not need a co-applicant.
2. Do you have a limited credit history? If you have a thin (little-to-no credit) credit history, a co-applicant with a good credit score can help you qualify for a loan you might not otherwise be able to get.
3. Are you applying for a large loan? If you’re applying for a large loan, such as a mortgage or a business loan, the lender may require a co-applicant to help spread the risk. In these cases, a co-applicant may be necessary to get the loan approved.
4. Do you have a history of missed payments or defaults? If you have a poor credit history, a co-applicant with a good credit score can help offset your credit risk and increase your chances of getting approved for the loan.
5. Is the co-applicant someone you trust? If you decide to apply for a loan with a co-applicant, it’s important to choose someone you can rely on.

The best personal loans for co-applicants

Not all lenders allow you to apply for a personal loan with a co-applicant. Based on our research, here are four of the best personal loan lenders that accept joint applicants for financing.

Company	Rates (APR)	Loan Amt.	Credit score
LightStream	7.99% – 25.99% with autopay	$5K – $100K	660+
SoFi	8.99% – 23.43%	$5K – $100K	680+
Upgrade	8.49% – 35.97%	$1K – $50K	580+
Achieve	7.99% – 35.99%	$5K – $50K	620

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Best for excellent credit: LightStream

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Personal loan

• The Rate Beat Program has a better rate than anyone on unsecured loans
• Some borrowers receive funding the same day they apply
• Get an autopay discount of 0.50% 

LightStream is a great option if one or both co-applicants have a high credit score and can qualify for low rates starting at 7.99%. LightStream’s Rate Beat program will beat any rate competitors offer by 0.10 percentage points.

LightStream also offers a hassle-free online application that takes just a few minutes to complete. You won’t be able to check your rates without a hard credit pull, but once you apply, you can expect to receive quick funding. Good-credit borrowers can even get their funds the same day they’re approved.

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Best for good credit: SoFi

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Personal loan

• Same-day funding is available for qualified borrowers
• Large loan amounts are available up to $100,000 
• Fast pre-qualification tool

SoFi offers personal loans to good credit borrowers seeking low interest rates. You and your co-applicant can prequalify in just 60 seconds online and see your rates.

Those who qualify may be able to get same-day funding on personal loans, and borrowers willing to sign up for autopay are eligible for a 0.25% discount. The best part? SoFi doesn’t charge prepayment or late fees, and origination fees can be as low as 0%.

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Best for fair credit: Upgrade

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Personal loan

• Minimum loan amounts start at $1,000, making these good loans for smaller expenses
• Choose your monthly payment and terms
• Check your rate in minutes without affecting your credit

Upgrade is a great option for co-borrowers who need a smaller loan starting at $1,000. You can check your rates without any commitment or impact on your credit score. If you apply and get approved, funds can be made available as soon as the next day.

Upgrade provides flexibility in its loan products, allowing borrowers to select the terms and monthly payments that work best for their budget. Origination fees top out at 9.99%, but Upgrade provides easy-to-understand explanations of your loan agreement so you know your fees and payment terms ahead of time. 

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Best for choosing payment date: Achieve

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Personal loan

• Choose your own loan amount, terms, and payment date
• Best for choosing payment date
• Potential to qualify for lower rates when you have a co-borrower

Achieve is a personal loan lender that boasts flexibility. It offers term options of two to five years, loan amounts from $5,000 to $50,000, and the ability to select your payment due date. Borrowers applying with a co-borrower may qualify for an interest rate discount.

Achieve promises same-day decisions for some borrowers and funding is possible in 24 to 72 hours. You can also choose how you’d like to apply—on the phone with the help of a representative or online on your own. Origination fees vary from 1.99% to 6.99%, so keep that added cost in mind if you apply.

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How to choose the right co-applicant for your personal loan

Choosing a co-applicant for a personal loan is a crucial decision. Not only can it impact the loan, but it can affect the relationship between co-applicants. Consider the following when selecting a co-applicant:

• Trustworthiness: Choose someone you trust to make the loan payments on time and take the responsibility of the loan seriously. Remember, you could become responsible for the full loan amount if the co-applicant can’t make their required loan payments.
• Creditworthiness: When at least one co-applicant has a good credit score, this can increase the chances of getting approved for the loan and result in more favorable loan terms. 
• Communication: Choose someone who communicates well with you and with whom you can discuss the loan terms and repayment plan without any conflicts or misunderstandings.
• Relationship: Consider your relationship with the co-applicant, whether it’s a family member, friend, business partner, or romantic partner. Ensure your relationship can withstand the financial responsibility of co-applying for a loan and any potential disagreements that may arise.
• Shared goals: Ensure that you and your co-applicant have the same goals in mind for the loan funds, whether they are for home improvements, debt consolidation, or a major purchase. Discuss the loan’s purpose and ensure you are on the same page.

How to apply for a personal loan with a co-applicant

The process for applying for a personal loan with a co-applicant is the same as when applying on your own. You’ll research lenders and compare rates, terms, and fees. The major difference is that you’ll also provide the personal information of your co-applicant as well as yourself. 

Typically, both applicants will need to provide:

• Name, address, and Social Security number
• Income
• 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. Lenders will check the credit score and credit report of both applicants when deciding whether to grant the loan.

FAQ

Can a co-applicant be removed from a personal loan?

While it is possible to remove a co-applicant from a personal loan, it may not be easy. The process of removing a co-applicant will depend on the lender’s policies and the terms of the loan agreement.

In most cases, the lender may require the co-applicant’s consent to be removed because the co-applicant is equally responsible for repaying the loan, and the lender must ensure the remaining borrower can still repay the loan independently.

If the co-applicant agrees to be removed, the remaining borrower may need to provide additional documentation and undergo a credit check to prove their ability to repay the loan on their own. 

If the co-applicant does not agree to be removed, the borrower may need to refinance the loan in their name or pay it off in full. 

Can I add multiple co-applicants to a personal loan?

The ability to add multiple co-applicants to a personal loan will depend on the lender’s policies and the terms of the loan agreement. Some lenders may allow multiple co-applicants, while others may only allow one.

Does a co-applicant need good credit?

Your co-applicant isn’t necessarily required to have good credit, but it certainly helps. When you apply for a loan with more than one person, lenders often consider the lowest credit score among the applicants.

The better your co-applicant’s credit (and the greater their assets and income), the bigger the boost they’ll provide to your application. Conversely, if your co-applicant has poor credit, they could jeopardize your approval odds altogether.

How is a co-applicant’s credit impacted when added to a personal loan?

Both applicants will see a similar impact on your credit when obtaining a personal loan. The initial hard credit pull may bring down the score temporarily, but with responsible repayment, a personal loan should generally help both applicants’ credit.

That said, a personal loan can affect your or the co-applicant’s credit utilization ratio, which is the amount of credit used compared to the amount of credit available. If the loan balance is high compared to the available credit, it can negatively impact the credit score for a time. 

Is my co-applicant responsible for payments if I can’t afford them?

A co-applicant decides with you to take out the loan and how to use that money. This means that both applicants are equally responsible for paying the loan.

If you can’t afford the payments, your co-applicant becomes responsible. Likewise, if the co-applicant cannot make payments, you become responsible. This is also the case if one of you passes away during the loan’s repayment term.