While every lender can have different criteria for approving a loan, some lenders will issue loans to borrowers with no credit or bad credit. If you are unable to qualify for a loan, asking a family member to be a co-signer may improve your chances of being approved. A co-signer is often a family member, parent, or spouse who agrees to act as a guarantor on the loan. This individual agrees to pay the loan back if you do not make the payments. The co-signer is responsible for the debt, so it is vital to continue to make payments on the loan to protect both parties’ financial future and relationship. Fortunately, we outlined a few key ways to stay up to date and eventually pay off co-signed loans.
Everyone cannot qualify for a loan due to bad credit or no credit history. If you find yourself in this situation, don't worry - there are still options available to you.
One potential solution is to ask a family member or loved one to co-sign on your loan. This can improve your chances of being approved, as the co-signer agrees to be responsible for the loan if you are unable to make payments. It's important to remember that the co-signer is taking on a financial risk, so it's crucial to make payments on time to protect both of your financial futures and relationship.
Benefits of Having a Co-signer
Before we dive into how to pay off co-signed loans, let's review a few benefits of using a co-signer.
Better Approval Chances
Whether you have limited credit history or poor credit history, a well-qualified co-signer might improve your approval odds. Creditors might be more likely to approve your loan application with a co-signer to guarantee the loan.
Improve Your Overall Loan Terms
A co-signer can help you get better loan terms. Lenders view co-signers as a form of security and might be more willing to give more favorable terms (interest rate, loan length and fees) to borrowers.
Is My Co-signer Responsible for Paying off My Loan?
When you use a parent or loved one for co-signed loans, they take on an obligatory role to assume responsibility for the debt in the event you fail to make payments. In a perfect scenario, your co-signer will never make payment on the loan because you repay it as planned. In reality, this isn't always the case — with 38% of co-signers paying some or all of the loan because the primary borrower failed to do so.
Tips for Paying Off Your Loan
Knowing how to pay off loans, in any circumstance, is vital. But for co-signed loans, it becomes even more critical because it doesn't just impact your credit. As such, we've outlined a few easy and actionable steps you can use to learn how to pay off loans faster.
Budget for Success
Budgeting can serve as a powerful way to pay off your co-signed loan. It can bring a sense of order and purpose while helping you identify a monthly or bi-weekly payoff goal to repay the debt. Contrary to popular belief, budgeting doesn't mean selecting a strict monthly spending limit and hoping you'll stick to it. And there are a number of different budgeting methods you can use to create a plan and pay off your co-signed loan.
Be in Communication with Your Cosigner
When you have a co-signed loan, it's imperative to communicate with your co-signer, especially if you feel you will be late on a payment. Unfortunately, this isn't always the case. According to LendEDU, 34.40% of co-signers said their children made a late payment, while 56% of co-signers believe their credit scores were impacted negatively.
Consider Another Source of Income
If you're looking to learn how to pay off loans faster, it's all about paying more. However, when you look at your budget, you realize every category is maxed out. Fortunately, we live in an environment of side hustles. Whether it's driving for Uber, freelance writing, delivering food, taking online surveys, or doing handyman or handywoman work, there are many ways to generate additional income.
Consider Refinancing Your Loan
As previously mentioned, making regular, on-time payments on your loan can help improve your credit. In the process, you may be able to refinance the loan independently — without a co-signer. You may also qualify for a lower interest rate and better terms.
Apply for a Loan through Integra Credit
We get it — asking a family member or loved one to co-sign a loan for you can be a humbling experience. However, you may not have to. At Integra Credit, we help people with all types of credit, including bad credit. Apply today or contact us with inquiries.