Personal loans are the most popular products offered by banks as well as other private lenders. All banks give out personal loans and there are even online lending services and platforms that have similar financing products. Generally speaking, the popularity of personal loans is a result of how easy it is to get them. While the borrower’s credit rating will matter, an individual’s loan request will be approved even if he has a mediocre credit file.

Furthermore, there are no restrictions when it comes to what can be done with the money. The borrower has complete control. It is also worth mentioning that most personal loans are unsecured, however, lenders will require collateral as part of the agreement if the borrower’s credit rating is too low or if he needs a very large amount of money.

This having been said, as easy as getting a personal loan or even one with no credit check may be, the debt can still be expensive if you submit your loan request without preparing your credit file beforehand. Here is what you should do to get the best possible terms and conditions:

Repay Your Credit Card Debt

Almost everybody owns a credit card nowadays and uses it without restrictions. While using your credit card can help you build up your credit score, over time, it can also reduce your rating before getting a loan. Look at what limit you have on your credit cards and make sure that your credit utilisation ratio does not go over 25%.  If you’ve used more than 25% of the total amount of money that is available to you through the credit card, repay some of it until your debt is below this limit.

Having a high credit utilisation ratio will signal lenders that you are unable to manage your personal finances and they may give you a higher interest rate or set a lower limit for how much money you can borrow.

Please keep in mind that you do not have to pay off your entire credit card debt, however, it will make it easier to manage your personal finances when repaying the personal loan.

Consolidate Your Loan Debt

If you already have one or more loans that you are currently repaying, consolidate them to give your credit rating a boost. Furthermore, a debt consolidation loan will also make it easier to repay the debt and reduce its overall cost.

Take into consideration that debt consolidation loans usually require collateral and have very long terms. This makes them serious long-term financial commitments that you should only make if you have a very stable source of income.

Use the Online Tools to Establish Your Interest Rate

Part of the preparation to apply for a personal loan is shopping around to find the best lender. While submitting multiple applications to different banks and lenders will damage your credit score, using the payment calculator apps hosted on their websites is safe.

Doing this will enable you to find and choose the best overall deal, however, keep in mind that you will usually get the base terms and conditions. Once you talk to a bank representative about applying for the loan, it will be possible to negotiate a better deal.

Avoid Taking out Payday Loans or Using Your Credit Cards before Requesting a Loan

Microloans and payday loans can be extremely useful for individuals that are going through a financially difficult time, however, using them too often will reduce your credit rating. This makes it important to refrain from taking out any type of short-term loan prior to sending in your application. In case of an emergency, there are alternatives that you can use, in the form of online lending apps (these do not report the transactions to credit agencies).

The ability to have loans cosigned has given many individuals the chance to borrow more money than the lender would normally agree to give them. The process itself is extremely simple and most lenders have cosigned loans among their business or personal financing deals.

As easy as it may be to have a loan cosigned, finding the right person to do it can be difficult. This is mainly because when cosigning, both the borrower and the cosigner will experience the consequences of missing monthly payments or failing to repay the money. Here is what you need to keep in mind when deciding who to ask to cosign your loan request.

What Is a Cosigned Loan?

Cosigned loans are forms of debt that require an additional individual to sign the loan agreement. By becoming a cosigner, this person agrees to repay the loan if the borrower is unable to. Furthermore, when it comes to cosigned loans, lenders also look at the credit rating of the cosigner when establishing the terms and conditions of the agreement. This makes it easier for individuals with poor credit ratings to obtain loans that they would not have access to otherwise.

It is also important to keep in mind that both the borrower and the cosigners can have their credit score lowered if they are unable to repay the loan on time. The act of cosigning spreads the responsibility of repaying the loan between the two in equal measure, which means that both individuals will suffer the same credit score reduction.

Who to Select as a Cosigner?

Most lenders will only allow blood relatives to act as cosigners to ensure that there will be no issues if the borrower cannot repay the money. However, if you are prepared to negotiate with the bank representative, it should be possible to have anyone cosign your loan request, provided that they have a high credit score and a good relationship with the lender.

This having been said, who is the best person to ask to be a cosigner? Generally speaking, you should only choose individuals who you trust and know can properly manage their personal finances. Even if you do not intend to rely on them to make any monthly payments, knowing that they will be able to take over the repaying of the loan, in case of an emergency, is important.

Ask your parents and siblings if they would be willing to cosign your loan request, however, keep in mind that your spouse may also be able to do this. Furthermore, some lenders also allow employers to become cosigners, and many companies promote this type of support.

How to Prepare When Applying for a Cosigned Loan?

Preparing to apply for a cosigned loan, as a borrower, is not any different from any other type of loan. Focus on reducing your credit utilisation ratio, repay any outstanding debt that you might have and avoid using your credit cards a few months before submitting your application. You should also refrain from taking out payday loans or any other similar microloans.

This having been said, the credit score of the cosigners is also important in determining what interest rate you will be offered, which means that it is recommended for the cosigner to follow the same steps as the borrower. Generally speaking, the higher the credit rating of the borrower and cosigner, the better the terms and conditions will be.

Overall, cosigned loans can be extremely useful tools, provided that you find the right individual to help you get the loan. Those interested in getting a cosigned loan should first ask their parents and siblings, even if their credit rating is not great, and only then move on to employers and friends.

Having the ability to get a cosigned loan is a great way for individuals with low credit scores to borrow money. The process itself is extremely simple and only requires an additional individual to sign the loan agreement. Most lenders offer cosigned loans as part of their standard personal and business offer, however, it should be possible to negotiate with a bank representative and have any type of loan cosigned.

This having been said, please keep in mind that the cosigner will almost always have to have a credit score that is equal or greater than that of the borrower, allowing him to act as a guarantor. So, what are the best loans to have cosigned? To answer this question it is first important to understand how cosigning works.

How Does Cosigning Work?

A cosigned loan is very similar to regular ones in the sense that the borrower takes out a loan from the lender. An interest rate is attached to the loan that the borrower must pay as he repays his debt. However, when having a loan cosigned, the borrower will need another individual to sign the agreement. The cosigner will act as a guarantor and repay the money if the borrower is unable to.

It is also important to keep in mind that lenders look differently at cosigned loans than regular ones. When applying for a regular loan, the bank only analyses the credit rating of the borrower. When applying for a cosigned one, the cosigner’s credit score is also taken into account.

This can make it easier for individuals with poor credit ratings to borrow amounts of money that they wouldn’t otherwise have access to. Furthermore, they are a great way to build up one’s credit score, over time.

What Types of Loans Can Be Cosigned?

Generally speaking, all banks and other private lenders will have certain standard cosigned deals on offer. These often have fixed benefits such as lower interest rates, higher value limits, and a more relaxed repayment schedule. However, any loan can be cosigned, provided that you negotiate the deal with the bank representative.

Keep in mind that it is only possible to cosign loan agreements. Credit card agreements or other types of banking services will not be able to be cosigned.

Furthermore, cosigning loan agreements is a practice only used by banks and various other private lenders that emulate their functional structure. In other words, cosigning an online loan or a microloan from a P2P lending platform is not yet possible.

What Loan Should You Get a Cosigner for and Why?

While almost any type of agreement can be cosigned, it is usually better to choose this route only when looking to borrow large amounts of money. One of the main issues that young adults have is the fact that they do not have the credit rating required for a loan large enough to purchase a house. Getting a parent to cosign the loan agreement makes it possible for them to borrow the money and also get a lower interest rate if the cosigner has a high credit rating.

The best way to take advantage of cosigned deals is by applying for large secured personal loans that have variable interest rates. Although the variable interest rate may increase the cost of the loan, these loans also tend to have higher values than fixed-rate ones.

As a rule of thumb, always find cosigners that you would trust with your finances. Most individuals ask their parents and siblings to cosign the agreements. This ensures that if the borrower is unable to make one or two monthly payments, the cosigner can be trusted to make them for them.