What you need to know about becoming a co-applicant for a personal loan

Having a co-applicant on a personal loan helps reduce some of the burdens of paying back the loan.

Personal loans have become one of the significant debt categories in the U.S., as they often have lower interest rates than credit cards, and there are so many ways they may be utilized.

You may utilize a personal loan for nearly anything, including emergency needs, home repairs and renovations, a wedding, a funeral, a trip, and more. (Though, if your objective is to utilize a personal loan for college expenditures or small business expenses, you’ll have to double-check with the lender’s conditions since many limits the use of personal loans for these reasons.)

Another allure to personal loans is that lenders often provide a wide variety of loan amounts — you may apply for as little as $500 and as much as $100,000, so there’s a lot of freedom there. But if you’re on the fence about taking on a considerable loan, say for a significant home renovation or a lavish wedding, paying it all back on your own might sound somewhat overwhelming. However, here is where a co-applicant may be able to take off some of that strain.

A founder is someone who applies for a loan with you and is equally responsible for repayment. Co-applicants are co-borrowers who are included on your loan application form.

Co-applicants are not to be confused with co-signers, however. A co-signer is someone who may add their name to your application to help you qualify for a loan. Still, they aren’t financially responsible for paying back the loan until you are unable to continue making payments.

Benefits of having a co-applicant

Although bankruptcy should always be viewed as a last choice, it is occasionally essential for financial reasons. While bankruptcy might help you get your finances under control, one of the most common side effects is impaired credit. After bankruptcy, poor credit might make it difficult to qualify for new credit products.

Fortunately, the impact of bankruptcy on your credit report is temporary and fades over time. After bankruptcy, you may be able to acquire a personal loan. Find out how to borrow after bankruptcy at BKHQ and know if it’s the best solution for you.

When applying for a personal loan, it’s usual for lenders to assess your credit history, debt-to-income ratio, and other qualifications to decide your loan amount, interest rate, and the length of your loan term. Applying with a co-applicant who has a better credit score than you may help you get accepted for a cheaper interest rate and other more advantageous loan conditions.

And since the salaries of two applicants are being taken into account, this may help you be authorized for a bigger loan. You may be considered a less risky borrower if a lender understands that two sources of income may be utilized to repay the entire loan.

Sharing responsibility for a personal loan might also help reduce the risk of skipping payments if you lose your job. Remember that missed payments may negatively impact both parties’ credit.

When you should consider having a co-applicant

Because co-applicants have a financial obligation to return what’s borrowed, it makes sense for a co-applicant to be someone who will also profit from the loan. If you and your husband have been putting off upgrading your home for years, you may consider including him as a co-applicant on your application. Or maybe you want more finances to take your business to the next level; if you have a business partner, this individual will also profit from the money and, therefore, may be happy to be your co-applicant (as long as the lender permits you to utilize the loan for this reason) (as long as the lender allows you to use the loan for this purpose).

Also, having a co-applicant in these instances would be advantageous if you don’t have enough credit history under your belt to get accepted for a reduced interest rate. It may also assist if you need to take out a larger quantity of money, but you don’t have a stable income.

Additionally, specific lenders, like SoFi Personal Loans, demand borrowers to have a co-applicant if they’re a non-resident immigrant or a DACA participant.

Find a personal loan that permits you to have a co-applicant

A co-borrower or co-applicant isn’t available with every private loan provider. However, just a handful of them provides applicants with this option.

SoFi Personal Loans

SoFi Personal Loans are not only fee-free, but you may also borrow large quantities. Applicants may borrow between $5,000 and $100,000, making this an excellent choice for individuals needing additional funds to meet larger bills.

You may get your loan approved the same day or the following working day if you do not need to provide extra information with your application. Additionally, this lender permits you to apply with a co-applicant.

When you apply for a SoFi Personal Loan, you may join the company’s membership platform and access various additional benefits, such as career counseling and financial advice.

Personal Loans from LightStream

This lender offers personal loans for almost any reason, except for higher education and small companies. The interest rate ranges vary according to the loan being taken out.

LightStream charges no origination, administrative, or early payments costs, and repayment durations vary from 24 to 144 months. During the application procedure, you may add a co-borrower.

Personal Loans at LendingClub

LendingClub does not impose prepayment penalties, meaning you will not be charged any fees or penalties if you choose to return your loan in full before the term expires. Smaller loan amounts are available via LendingClub loans, beginning at $1,000. The maximum loan is $40,000. LendingClub enables you to add a co-applicant when applying for money.

In conclusion

A personal loan may be an advantageous method of obtaining quick money for significant needs. And although the prospect of repaying the loan in whole may seem overwhelming, having a co-applicant share the burden might alleviate some of the strain.

Naturally, not all personal loans let co-applicants, so you should verify before submitting your application. And, as always, consult a financial counselor if you have any reservations about whether a personal loan will help you reach your objectives.