How to get a loan without a cosigner

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

When you can’t qualify for the loan you need because of a low credit score or limited credit history, the lender may suggest adding a cosigner to your loan. However, applying with a cosigner isn’t an option for everyone. If this situation sounds familiar, this guide provides information about how to get a loan without a cosigner so you can achieve your financial goals.

Understanding the role of a cosigner

If you don’t have the credit to qualify for a loan, a family member or friend who has strong credit can apply with you. The lender will consider the cosigner’s credit score and history, which can help you get approved or be eligible for more favorable terms, such as a lower interest rate. Your cosigner legally agrees to be responsible for the debt if you don’t pay according to the loan terms, so there is some risk associated with cosigning.

Some reasons you might want to get a loan with a cosigner include:

• You’re young and haven’t had time to build a credit history yet, so you don’t qualify on your own for the loan you want.
• You need better credit to be eligible for more favorable terms.
• You have a credit history but made financial mistakes in the past and need a chance to rebuild.

Are there reasons to not use a cosigner?

Although you could benefit from a cosigner when you have poor credit, you might ultimately decide to try to get a loan on your own. For one thing, you might not know anyone with a strong credit history who’ll agree to act as your cosigner. Because this person must take on the responsibility of repaying your debt if you don’t, they’re also risking their good credit, because late or missed payments would damage their credit as well as yours. 

Even if you have someone who would willingly act as cosigner, you might want to avoid putting this person on your loan. You might have concerns about damaging their credit and finances if something goes wrong, or you might not feel comfortable having a loved one closely involved in your financial affairs. Asking someone to cosign on a loan is a personal decision that could impact your relationship.

If you have good enough credit to go without using a cosigner, that may be the best option for you.

How to find a personal loan without a cosigner

These smart strategies can help you qualify for a personal loan, even if you have credit challenges and don’t have or don’t want to use a cosigner.

Shop around

Some lenders have more flexibility than others. Credit unions tend to be more lenient about approval than larger banks, especially if you’re already a member. In addition, online lenders can often afford to be more flexible because they aren’t covering the costs of physical locations.

Try to get prequalified to see your rates rather than fully applying for multiple loans. Every time you fill out an application, you’ll get a hard inquiry on your credit report, which can hurt your credit. Most lenders offer preapproval or prequalification without performing a hard inquiry.

Improve your credit

If possible, take some time to improve your credit to boost your chances of approval. Here are the steps to take:

• Request your credit reports from all three major bureaus and review them for any errors. If you find inaccurate negative items, you can dispute them by sending a communication such as an email or letter to the credit bureau in question.
• Make good choices for your credit now, such as making all your payments on time and paying down open credit card balances as much as possible.
• Improve your debt-to-income ratio. Lenders use this number to compare the amount of debt you have to the amount of money you make. The lower the number, the more likely you are to get approved for a loan. You can improve your debt-to-income ratio by paying down your debt, earning a higher income or both.

Modify your loan request

Making changes to your loan request can improve your chances of approval. For example, you can reduce the amount of the loan, which reduces the risk for the lender.

You can also apply for a secured loan instead of an unsecured loan. With a secured loan, the lender accepts an asset, such as your home or car, as collateral for the loan. It’s important to use this strategy carefully. While a secured loan can build your credit, the lender has a legal claim on the collateral, which means you could lose your property if you default.

How to get a student loan with no cosigner

The tips above also apply when you’re trying to get a student loan, particularly a private student loan. You can also try these additional strategies for how to get a loan without a cosigner specifically for student loans.

Apply for federal loans

The Free Application for Federal Student Aid process doesn’t consider credit when making decisions about financial aid. You can potentially get direct subsidized loans, direct unsubsidized loans, direct PLUS loans or parent PLUS loans through the FAFSA process, all without a credit check. Students with financial need can also qualify for the Federal Perkins Loan program.

Diversify your credit profile

Find ways to build your credit before applying for private student loan options. For example, you can:

• Apply for a secure credit card or no-credit credit card. Make sure the credit card you get reports to all major credit bureaus, and use the account responsibly.
• Ask a family member to add you to their credit card as an approved user. As long as they make credit card payments on time and in full, this strategy can improve your credit.
• Sign up for a product that reports your rent and utility payments to the credit bureaus. It can help you build a positive payment history. RentReporters and ExtraCredit are two options to consider.

Find the best loan for you

Many lenders specialize in financial products for people building or rebuilding their credit. Alternatively, you can use a cosigner now and refinance the loan in the future when your credit is stronger. Some loans let you release the cosigner after a sufficient period of timely payments and responsible account management. No matter your financial standing, it’s a good idea to start by checking your credit score and report whenever you plan to apply for a loan.

If you find questionable information that could hamper your chances of approval, consider working with Lexington Law for credit repair help.

Note: The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.