Why You Might Need a Co-Signor
For Your Personal Loan
A co-signor could be useful in getting a personal loan
Although everyone would like to think they qualify for a personal loan on their own, there may be times a lender will ask you for a co-signor. There may be various reasons why this may be necessary, and you have to make the decision whether you need the loan badly enough to ask someone to co-sign on your loan.
Lack of sufficient credit history
Minimal credit history is one of the most common reasons a lender may ask for a co-signor for your personal loan. Many people are reluctant to co-sign even for their children because of the risks involved, but if you are responsible enough, you shouldn’t have a problem finding someone to co-sign your loan. Keep in mind that the person who agrees to co-sign for you is just as responsible for the personal loan as you are, so if you don’t make the payments, your co-signor can be forced to do so. In addition, if you make the payments late, it will also affect your co-signor’s credit score.
Poor credit history
Sometimes if you have had credit problems the lender will ask for a co-signor on your personal loan instead of denying your application and giving you a bad credit loan at a higher interest rate. Of course, if you have had credit problems it may be difficult for you to find anyone willing to co-sign for you; however, it is an option that the lender may request in order to provide a favourable interest rate. Whether you are able or willing to accept this option will determine if the lender will approve your loan at the interest rate you are expecting.
Length of employment
The length of time you have held your current job is another factor that may cause the lender to ask for a co-signor for your personal loan. There are two reasons the length of time on your job may be detrimental: poor credit or lack of credit. For the borrower with good credit and a high credit score, the length of employment is not as much of an issue—at least not unless he continuously changes jobs. For the job jumper, even his good credit won’t help him with a new loan, and the time may come when the lender asks him for a co-signor.
Previous high credit
If you’re looking for a loan that is substantially higher than any of your previous loans, you may be asked to obtain a co-signor. Even if your credit is good, you may need to have a co-signor if your loan is over a certain amount, and the value of your collateral is not quite enough to cover the proceeds. If you are unwilling or unable to provide a co-signor, the lender may not approve your loan for the amount you are asking. In the end you have to make the choice whether you feel compelled to ask someone to co-sign for you. You must remember, however, that if you don’t increase the amount of your high credit you will still need a co-signor the next time.
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