Yes, a co-signer can surely affect the approval of your personal loan application. Some lenders also make it necessary to have a co-signer when you, as a borrower, do not have good credit score or regular income source.
What are the reasons behind a low credit score?
Having someone co-sign your loan means that the co-signer promises to pay the loan if you are unable to repay the loan on time.
It will be hard to get a personal loan if you are fresh out of college with no credit at all or if you have made default on your previous loan payments. In such a situation, a co-signer becomes mandatory with most of the lenders in the loan market.
Benefits of Having a Co-signer
There are also several benefits of having someone co-sign your loan when you make the application.
First of all, it decreases the risk faced by the lender and your loan is most likely to get faster approval.
Having a co-signer will also allow you to receive better interest rates and loan terms from the lenders.
You are more likely to get your loan approved when you have a co-signer.
As per the Federal Trade Commission, three out of four co-signers should pay on several types of loans when the primary borrower defaults on their payments.
Do I Need Someone to Co-sign My Loan?
You should carefully consider other options if you find yourself in a situation where the lender asks you for a co-signer. You know your condition very well and you don’t want someone to get in trouble.
You can try to fix your credit rating before you think of getting financial help.
However, if you need the funds for an emergency and there is no time to work on your credit, you can use a co-signer to get your loan approved.
You should determine whether you can pay off the loan on time to make sure that you are not putting your co-signer in harm’s way.
While looking for a co-signer, it is important to get someone who is financially responsible. If you find it hard to repay the loan, that person will be required to pay off the loan on your behalf.
The lender is not required to take any particular action to have the co-signer take over the payments when you default on your loan.
There are also some personal loan options that allow you to remove your co-signer after you make timely repayments for certain years on your loan.
Some lenders will not need you to have a co-signer or a guarantor if you are able to meet their standards of creditworthiness.
You may be able to qualify for a personal loan without a co-signer; however, having a co-signer will speed up the loan approval process and offer you better attractive interest rate.
Once the closing of the loan is completed, the payment history and the loan will show up on the credit report of the co-signer. The co-signer’s credit report will be affected if you, as the original borrower, do not pay on time.