How to find a cosigner for a loan

If you have poor credit, high debt or some other financial blemish on your record, you might find it hard to borrow money. And if you do qualify? It could mean sky-high interest rates as a result.

Fortunately, all hope isn’t lost — at least, if you can find a cosigner.

A cosigner is someone who applies for a loan, credit card or even a mortgage alongside you. Their credit score, income, debt and other financial details are considered when evaluating the application, and they’re even on the hook for payments if you fall behind.

It’s a risk for the cosigner, sure, but for the borrower, it can mean easier qualification, lower interest rates and better loan terms on the whole.

Are you thinking of getting a cosigner to buy a house or take out a loan? Here’s what you need to know.

Finding a cosigner

The majority of borrowers who use a cosigner choose someone close to them — a spouse, parent, grandparent, sibling or someone similar.

Unfortunately, not everyone has these options or, in some cases, the family members might not have great credit (a must if they’re going to apply for a loan with you).

If you find yourself in this scenario, try reaching out to:

• Friends - Do you have a friend who’s financially responsible and on solid ground income-wise? Ask if they’d do you a favor by cosigning your loan.
• Extended family - Aunts, uncles, cousins — they’re all valid cosigners. Just make sure they have good credit and a strong financial profile (i.e., manageable debts and steady income).
• Mentors - Personal or professional mentors may also be an option. Keep in mind they’ll need to know you well enough to trust your financial habits.
• Your parents’ friends - There are probably a few friends of your parents you’ve known all your life. Would any of them be willing to go out on a limb for you?

Though there are also services you can use to find a cosigner (CosignerFinder, HireACosigner, etc.), be cautious about going outside your personal circles here. These services often charge hefty fees, and there are even some reports of fraud among them. Always do your research and check the Better Business Bureau before using a cosigner you don’t know.

Can’t find a cosigner?

Ultimately, if you can’t find a cosigner, you’re not without options. Your best bet is to work on improving your credit. Getting a secured credit card, becoming an authorized user on someone’s account and reporting any errors on your annual credit report can all help, as can paying down your debts and settling all collections and overdue payments.

Depending on what type of loan you’re seeking, you may also be able to offer up collateral — some sort of asset the lender can seize if you fail to repay your loan. Keep in mind the risks in doing this, especially if the asset is something like your car (which you probably need for work).

Lastly, you can apply for less cash or put down a bigger down payment. The less money the lender has to put up, the smaller the risk you pose, the easier qualifying will be — no matter what your credit looks like.