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Getting credit when your score is low or you don’t have a strong credit history can be challenging. One way many people solve this problem on their first loan is by getting a cosigner. But this isn’t always an option for everyone. Find out more about this process, as well as how to get a loan without a cosigner, below.
What Is a Cosigner, and Why Would You Want One?
A cosigner is a person who agrees to be responsible for a debt if you can’t or don’t pay it. Typically, you get a cosigner when you don’t have sufficient creditworthiness on your own to qualify for the loan you need. The cosigner’s credit score and history are considered when approving the loan.
Some reasons you might want 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 qualify for more favorable terms.
- You have credit history, but some financial mistakes in the past have left it lackluster and you want assistance getting new credit so you can rebuild your credit history.
Reasons You Might Not Have a Cosigner
Not everyone in the above listed scenarios needs has a cosigner, though. Here are some reasons why you might not have a cosigner even if having one could help you get a loan.
You Don’t Have Access to a Cosigner
First, you simply might not have access to someone who can act as cosigner. Cosigners must have better credit than you to do much good, and they also have to be willing to put that good credit on the line to help you.
If you don’t make the payments on your loan, the cosigner’s credit is also hurt. They might also end up on the hook for the payments. This risk can limit who is willing to act as a cosigner.
You Want to Take Full Responsibility for the Loan
In some cases, you might have access to cosigners but want to avoid using them. Perhaps you want to avoid tying up a family member’s credit with your own loan. In other cases, you may simply want to avoid having loved ones be that involved in your financial affairs.
This is obviously a personal decision, and you have to decide what would be best for you and your relationships.
Tips for Getting a Personal Loan With No Cosigner
Whether you decide against a cosigner or don’t have access to one, you do still have options. Check out these tips for how to get a loan without a cosigner.
Some lenders are more flexible than others. Credit unions—especially ones in which you belong to already—tend to have more flexible requirements than larger banks. And online lenders can often afford to be more flexible because they aren’t covering the costs of physical locations.
Just remember not to apply for every loan you see. Each loan application can result in a hard inquiry on your credit, which can damage your score a little each time. Instead, read through all the requirements and talk to the lender if possible to determine whether you are likely to qualify for a loan before you apply.
Improve Your Credit Score
If the loan isn’t an immediate pressing concern, take some time to improve your credit score and creditworthiness to boost your chances at approval. Some steps to take include:
- Requesting your credit reports from all three major bureaus and reviewing 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.
- Making good choices for your credit now, including making all your payments on time and paying down any open credit card balances you might have as much as possible.
- Improving your debt-to-income ratio. This is how much debt you have compared to how much you make. You can improve it by paying down some of your debt, finding ways to make more reportable income or both.
Modify Your Loan Request
Try to get a loan for less money. The smaller the loan, the smaller the risk for the lender, and many might be willing to give you a chance for a lower amount than you originally wanted.
Get a Secured Loan
A secured loan is one that you back with collateral, typically in the form of a physical asset, like a car or a house. If you ever fail to pay back the loan, the lender can put a lien on the collateral. The benefits of this type of loan are that they can be fairly easy to get and typically designed to help you improve your credit, which means the lender probably reports to all three major credit bureaus.
There are a couple of downsides to this option. First, you pay interest, so the loan does cost you money. Second, you risk losing ownership of a physical asset, which could cause you even more problems in the long run if you can’t make your payments.
Additional Tips for Getting a Student Loan with No Cosigner
All of the above listed tips can apply when you’re trying to get a student loan as well—particularly a private student loan. But here are a few more tips that are specific to student loans.
Apply for Federal Loans
The Free Application for Federal Student Aid process doesn’t take credit into account when considering students for financial aid. You can potentially get direct subsidized loans, direct unsubsidized loans, direct PLUS loans or parent PLUS loans via this process, all without a credit check.
Build Your Credit Profile in Other Ways
If you don’t qualify for federal loans and want to see private student loan options, find ways to build your credit profile before you apply if possible. For example, you can:
- Apply for a secure credit card or no-credit credit card and use the account responsibly. Make sure the credit card you get reports to all major credit bureaus.
- Get added as an approved user on someone else’s credit card. Make sure the card in question reports credit information for approved users and that the person who adds you to their account uses their credit cards responsibly.
- Consider signing up for a product that allows your rent and utility payments to be reported to the credit bureaus to help you build positive payment history. RentReporters and Experian RentBureau are just two options.
Find the Best Loan for You
Many loan options exist, and many lenders specialize in credit for people who are building or rebuilding their credit histories. There’s a good chance you can find something that suits your needs by following the steps above. Alternatively, you can get a cosigner now and refinance the loan in the future when your credit is stronger.
Some loans also come with options for having the cosigner released after a sufficient period of timely payments and responsible account management. No matter your financial standing, it’s a good idea to start by looking at your credit report whenever you plan to apply for a loan.
If you find questionable information that could hamper your chances at approval, consider working with Lexington Law for professional credit repair.
Reviewed by John Heath, Directing Attorney of Lexington Law Firm. Written by Lexington Law.
Born and raised in Salt Lake City, John Heath earned his BA from the University of Utah and his Juris Doctor from Ohio Northern University. John has been the Directing Attorney of Lexington Law Firm since 2004. The firm focuses primarily on consumer credit report repair, but also practices family law, criminal law, general consumer litigation and collection defense on behalf of consumer debtors. John is admitted to practice law in Utah, Colorado, Washington D. C., Georgia, Texas and New York.
Note: Articles have only been reviewed by the indicated attorney, not written by them. 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.