To secure a loan with a cosigner, first identify the loan type (e.g., personal, auto, or mortgage) and select a cosigner with strong credit, stable income, and a good relationship with the borrower. The cosigner must formally agree to share responsibility for repayment, which can improve the borrower’s chances of approval and lower interest rates. Both parties should apply together, ensuring transparency about income, debts, and credit history. Lenders evaluate the combined financial profile, and approval depends on the cosigner’s ability to mitigate risk.

The cosigner’s role is critical because lenders view them as a guarantee, reducing the perceived risk of default. A cosigner with excellent credit and higher income can significantly boost the borrower’s application. For example, a 2023 Federal Reserve report found that 68% of consumers with a cosigner obtained loan approvals versus 42% without one. Additionally, loans with cosigners often receive lower interest rates—typically 1.5-3 percentage points lower—due to reduced risk for lenders. The Consumer Financial Protection Bureau (CFPB) notes that default rates on loans with cosigners are 25% lower than those without, as the cosigner’s financial stability provides a safety net. However, the cosigner remains legally liable for repayment, which underscores the importance of careful consideration before involving someone. This dynamic is particularly beneficial for borrowers with limited credit history or income, enabling access to essential financial tools while balancing risk for lenders and cosigners.