Can You Get a Consolidation Loan With a Co-Signer If Your Credit Is Really Bad?

A consolidation loan can be an ideal solution for someone who has many monthly payments on debts at high interest rates. The consolidation loan pays off all the other debts and leaves the borrower with just one monthly payment, ideally at a lower interest rate. However, getting the loan can be difficult for someone with a bad credit score. One solution is to have a co-signer who applies jointly for the loan.

Co-Signer

If your credit is really bad, the most difficult part of getting a consolidation loan with a co-signer will likely be finding someone who is willing to co-sign. The co-signer takes on full financial responsibility for the loan, meaning that if you fail to make the payments, the co-signer must make the payments. Part of co-signing a loan includes agreeing to pay the full amount of the loan, if needed, including late fees and collection costs. Ask friends and relatives if they would be willing to co-sign, and convince them that you are committed to paying the loan in full.

Getting a Loan

Not all lenders handle consolidation loans with co-signers. Before visiting a bank or credit union, call to confirm whether the lender accepts applicants with bad credit and a co-signer. Shop around for the best interest rate, because they differ from one lender to another. If the co-signer has a good credit score, you should be able to get a much lower interest rate than you would be charged if you were applying alone.

Tips for Success

Because the co-signer has a solid credit score that allows you to get the consolidation loan, this person can also be a useful resource for planning your finances. One way to increase your chances of making your payments is to have your co-signer help you make a budget that includes the consolidation loan payments. Stick to the budget and avoid using credit cards for any expenses, because these will add additional debt payments to your monthly expenses.

Missing Payments

If you think you might not be able to make one of your scheduled payments on the consolidation loan, tell your co-signer as soon as possible. Missing a payment will affect your co-signer's credit score as well, so he has a right to know about it. Try to work out a solution together, perhaps having you pay as much as you possibly can and having the co-signer pay the difference on the monthly payment.