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Personal loans with a cosigner

Having trouble getting a personal loan or qualifying for a competitive interest rate on your own? Here's one solution.

While researching personal loans, you may have come across the term cosigner. This is an individual who agrees to pay your debt if you fail to repay it. Many lenders accept a personal loan with a cosigner because it reduces their risk. In turn, cosigners can help the borrower secure a lower interest rate and better financing conditions. At this point, using a cosigner may seem like a no-brainer. However, there are risks to consider before proceeding.

Cosigner loan you can apply for

Name Product Interest Rate Loan Amount Loan Term Requirements Credit Score Link
LendingMate Personal Loan
43% (British Columbia and Ontario) and 34.90% (Quebec)
$2,000 - $10,000
12 - 60 months
No min. income or employment requirements
Min. credit score: 300
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An online lender specializing in unsecured cosigned loans. Cosigner is required for application. Get a loan fast with bad credit and no credit check.
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Overall representative example
If you borrowed $20,000 over a 5-year term at 9.50% APR (variable), you would make 60 monthly payments of $420.04 and pay $25,202.23 overall, which includes interest of $5,202.23. The overall cost for comparison is 9.50% APR representative.

How do cosigner loans work?

A cosigner is a person that agrees to pay your debt if you miss a payment or default on the loan. In the eyes of the lender, personal loans with a cosigner are less risky since the lender can collect funds from another person if the primary borrower fails to repay. This is safer than relying solely on credit.

The catch is lenders will want the cosigner to have strong credit, usually stronger than the primary borrower. During the application process, lenders will assess the cosigner’s finances the same way they assess the primary borrower’s finances.

Often, borrowers seek a cosigner because they are aware they’ll have trouble getting approved on their own. For example, a student with little to no credit history may ask their parents to cosign their student loans. Or, an individual in the processes of rebuilding credit may ask a friend to cosign a personal loan.

Is a cosigner different from a guarantor?

The definition of a guarantor is someone who provides a guarantee. In terms of loans, this means a person who will guarantee another person’s debt if they fail to repay. This does sound awfully similar to a cosigner, but there is a subtle difference.

If the primary borrower defaults on a loan, the lender does not need to take additional action to collect payment from a cosigner. With a guarantor, the lender would need to request payment from the guarantor. In practice, the terms cosigner and guarantor are often used interchangeably.

Is a cosigner different from a joint applicant?

The definition of a joint applicant, sometimes referred to as a co-borrower, is a borrower who applies for a loan alongside another borrower. All joint applicants share the burden and the benefits of the debt equally.

A cosigner is different from a joint applicant because they don’t reap the benefits of the loan. They only share the burden. In addition, a cosigner is usually involved to assist the borrower with obtaining financing.

What a cosigner means for different loan types

As a cosigner, you only assume the liability of the loan and none of the loan’s benefits. If you want to assume the benefits of the loan too, you should be applying as joint applicants instead.

The type of loan the primary borrower is seeking will affect the cosigner. In general, there are two main loan types: secured and unsecured. Consider the implications of each below.

Secured loan

A loan that has collateral attached to it is a secured loan. A home, car or any asset with significant value could be used as collateral. Mortgages and car loans are common loans under this category. Secured loans are generally safer because the lender has an asset to seize if the borrower stops making payments or defaults.

With any loan, cosigners only assume the liability, but none of the benefits. This means if the primary borrower obtains a mortgage, car loan or other secured loan, the cosigner does not own or possess any benefits of the purchased asset or collateral. The cosigner is simply responsible for repaying the debt if the borrower fails to pay or defaults. Keep in mind that secured loans are actually safer for cosigners because the lender may repossess the collateral instead of turning to the cosigner if the borrower fails to repay or defaults.

Unsecured loan

A loan with no collateral is an unsecured loan. These loans are perceived as riskier because the lender has nothing to seize if the borrower fails to pay or defaults. In addition, it’s more risk to the cosigner because there’s a greater chance that they will have to repay the loan in the worst-case scenario.

Similarly to secured loans, the cosigner does not reap any benefits from an unsecured loan. The cosigner only assumes the obligation to pay the debt. That means if the borrower used the loan to go to school or make improvements to their home, the cosigner has no ownership or rights to the products or services bought by the borrower.

Compare personal loans from other lenders

Most of the lenders below don’t focus only on cosigner loans, but they may ask you for a cosigner to support your loan application.

Name Product Interest Rate Loan Amount Loan Term Requirements Credit Score Link
LoanConnect Personal Loan
Secured from 1.90%, Unsecured from 5.75%-46.96%
$500 - $50,000
3 - 120 months
Currents debts must total less than 60% of income
Min. credit score: 300
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An online broker who helps inform clients towards better finances. Get pre-approved by different lenders for unsecured or secured loans in 5 minutes with any credit score.
goPeer Personal Loan
8.00% - 31.00%
$1,000 - $25,000
36 - 60 months
Recommended income of $40,000 /year
Min. credit score: 600
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Canada's first regulated consumer peer-to-peer lending platform offering unsecured loans. Connects creditworthy Canadians looking for a loan with Canadians looking to invest. goPeer strives to offer the most competitive interest rates. Apply in minutes and get a response within 24 hours.
Spring Financial Personal Loan
17.99% - 46.96%
$500 - $15,000
9 - 48 months
Min. income of $1,800 /month, 3+ months employed
Min. credit score: 400
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An online lender offering unsecured personal loans and credit builder loans. Those filing for bankruptcy or a consumer proposal can also apply. If you're not eligible for an unsecured loan, you may be offered a loan to help rebuild your credit.
ConsumerCapital Personal Loan
19.99% - 34.99%
$1,500 - $12,500
24 - 60 months
Min. income of $1,900 /month, 6+ months employed
Min. credit score: 600
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An online lender that provides fast unsecured personal loans. Complete an application in less than 10 minutes and get a decision within 24 hours. For faster loan approval, complete the Flinks bank integration in the app.
SkyCap Financial Personal Loan
12.99% - 39.99%
$500 - $10,000
9 - 36 months
Min. income of $1,200 /month, stable employment
Min. credit score: 550
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An online lender offering unsecured personal loans to borrowers with a wide range of credit scores. Apply in less than 5 minutes and if approved, receive financing in as little as 24 hours.
FlexMoney Personal Loan
18.90% - 46.93%
$500 - $15,000
6 - 60 months
Min. income of $2,000 /month, 3+ months employed
Min. credit score: 500
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An online lender offering flexible unsecured loans. Apply in less than 10 minutes and if approved, receive financing in as little as 24 hours. Pay off your loan at any time.
Loans Canada Personal Loan
Secured from 2.00%, Unsecured from 8.00% to 46.96%
$300 - $50,000
3 - 60 months
No min. income or employment requirements
Min. credit score: 300
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An online broker with the largest lender network in Canada. Get matched for free with lenders offering both unsecured and secured loans through one quick application regardless of your financial situation.
OFFER
Mogo Personal Loan
9.90% - 46.96%
$200 - $35,000
6 - 60 months
Min. income of $13,000 /year
Min. credit score: 500


Mogo offers a 100-day money-back guarantee. If you're not happy with your loan, pay back the principal and get your 100 days of paid interest and fees back.
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An online lender who aims for a hassle-free process through same-day unsecured loan approval and funding. Get a loan fast and track your credit score for free.
Fairstone Personal Loan (Unsecured)
26.99% - 39.99%
$500 - $25,000
6 - 60 months
Able to make monthly repayments on your loan
Min. credit score: 560
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An online lender with a team dedicated to professional service. Get a quote for an unsecured loan without impacting your credit score. Receive funds within as little as 24 hours. No prepayment fees.
Fairstone Personal Loan (Secured)
19.99% - 23.99%
$5,000 - $50,000
60 - 120 months
Must be a homeowner
Min. credit score: 560
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Use your home equity to get a secured loan up to $50,000 with flexible repayment options and a long loan term. Get a quote without impacting your credit score.
Loan Away Personal Loan
19.90% - 45.90%
$1,000 - $5,000
6 - 36 months
No min. income or employment requirements
Min. credit score: 300
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A lender that approves unsecured loans in as little as 20 minutes. Get affordable monthly repayments with any credit score.
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Benefits and drawbacks of cosigner loans

Benefits

  • Can increase your odds of approval.
  • Securing a lower interest rate is possible.
  • Potential for more favourable repayment conditions.

Drawbacks

  • The loan could affect the cosigner’s credit.
  • The cosigner’s credit might not help you get approved.
  • Finding a cosigner you trust and is willing to make the financial commitment can be challenging.
  • Friendships and family relationships could be strained if you default.

Is it easier to get a personal loan with a cosigner?

In theory, yes, it is easier to obtain a personal loan with a cosigner. Lenders like cosigners because they have a second person to turn to if they have trouble collecting the debt. However, if the cosigner has bad credit, poor financial history or is otherwise perceived to be a risky borrower, your odds of getting approved probably won’t increase.

On the other hand, if the cosigner is perceived to be an excellent candidate for lending, they may eliminate part of the risk for the lender. The reduced risk can lead to better odds of approval, more favourable conditions and even a better interest rate.

Cosigner requirements

Eligibility requirements vary between lenders, but they usually include the following:

  • Be the age of majority in your province or territory
  • Be a Canadian citizen or a permanent resident with a valid Canadian address
  • Established credit history
  • Stable income
  • Have an active, open bank account in your name

How to apply for a personal loan with a cosigner

  • Compare your options. Start by comparing different lenders and financial products. For every loan you come across, be sure that cosigners are accepted.
  • Prepare documentation. In most cases, the primary borrower and the cosigner must provide the required documents to the lender. Government identification, proof of income and employment information are common requests. Be proactive in gathering this information from the cosigner to make the application process smoother.
  • Apply for financing. Now, you’re ready to finalize your loan application online or in person. If the cosigner is available, consider having them there with you when you apply in case additional information is required.

Three important questions for the cosigner to make a smart decision

Cosigning a loan is a big responsibility. If the primary borrower doesn’t make payments or defaults, the cosigner is on the hook for repaying the debt. Money can cause a lot of strain on a relationship. Before you cosign, be sure to ask some important questions about your financial situation and your ability to repay the loan.

  1. What is the loan for? Understanding the loan’s purpose is important for the cosigner. They will likely want assurance that the loan is for something reasonable and responsible.
  2. How much are you borrowing? A small amount is easier to repay than a large amount. A lower amount is more attractive to a cosigner because default is less likely. Even if default occurs, less money is required from the cosigner to settle the debt.
  3. What is the payment frequency? Knowing the scheduled payments is important for cash-flow purposes. Common payment frequencies are monthly, bi-weekly and weekly, but this could vary by lender.

Bottom line

Cosigners can help primary borrowers secure financing with better conditions and rates than if the borrower applied alone. This is especially true if the cosigner has great credit and an ideal financial position. However, as the risk for the lender decreases, the risk for the cosigner increases. The cosigner assumes a large financial responsibility when cosigning a loan – a decision that shouldn’t be taken lightly.

Frequently asked questions about cosigners

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