A man on the computer looking for a loan without a cosigner.

Forget That Cosigner

Looking to get your first personal loan? A cosigner can make your credit life easier, but you may be able to get a loan without one. If you are choosing to go the independent route, here are a few ways that you can qualify without that cosigner.

What Is A Cosigner?

First, what exactly is a cosigner and why would you want one anyway?

A cosigner is essentially someone that is vouching for you. By them signing a loan contract alongside you, they are telling the lender that they vouch for your ability to pay back the loan. In fact, they are endorsing your credit worthiness so much that they are agreeing to pay back the loan if you decide to default.

This is a great piece of insurance for a lender because it gives them a great deal of security. They get someone recommending you and another person to go after if the loan goes bad. Getting a cosigner would do two things for a potential borrower. It would allow you to qualify for a loan much easier and would provide you with cheaper interest rates and/or fees.

So why wouldn’t you want a cosigner?

Perhaps you can not find a cosigner or you want to be independent. Asking someone to cosign a loan is also very intrusive. You never know what your financial future holds and if you lose the ability to pay for a loan,your cosigner would be on the hook. Lenders can and will pursue them to collect your debt.

Qualifying For A Loan Without A Cosigner

So, now that we know just what a cosigner is and why you might not want one, let’s figure out how to qualify on your own. Here are some classic strategies that may work to get that approved offer.

Improve Your Credit Score

This is the best way to go and will have the longest positive effects. If you concentrate on building your credit, you can enjoy the benefits for years to come in the form of better loan rates, cheaper utility bills and even improved employment opportunities.

Two improve your credit, there are a lot of little things that you can do, but most of your score will come down to just two things. Your payment history and your credit utilization.

To improve your payment history, simply pay your bills on time. This one factor makes up about 1/3 of your credit score, so it is very important. If you are the forgetful type, take advantage of all of the tools that can help you pay your bills before the past due date. This means set up all the payment reminders that you can and use automatic payments whenever possible.

Credit utilization is a bit harder to manage, but you just need a bit of discipline. You want to be using or utilizing less than 30 percent of your credit to have good utilization. That means that if all of your available credit totals 6000 dollars, you should be using no more than 1800 dollars of it. Simple, right?

Improving your credit is a slow path to loan approval, but it will work in the long run.

Bring More Money To The Table

Is the loan that you are trying to qualify for a secured loan? If so, bringing more money to the table in the form of a down payment could be just the thing that gets you approved.

With a secured loan, if you default, your lender will seize the property that you purchased. If you come to the table with little money in the form of a down payment, you will almost always owe more than this property is worth. That means that a lender is likely to lose money during the first part of a loan if you default.

Putting more money down will make the loan less risky because the lender will have an asset that is more likely to cover the loan value. Less risk means better odds of approval and lower interest rates.

Increase Your Income

You might think that this is easier said than done, but there are actually many different ways to increase your income. Part time jobs are plentiful in our current economy and, with workers in demand, you can pick and choose your schedule.

Working just 5 extra hours a week can easily net you an extra 300 dollars a month or almost 4000 dollars a year. That might just be enough to move your income level up a bracket.

By increasing your income, you improve your Debt to Income ratio. Quite simply, that is the total amount of money that you owe compared to how much money you bring in. The more money that you earn, the less risk you will be for your loan.

Shop Your Loan Around

Finally, simply shopping your loan around might do the trick.

Not every lender will be right for you. Some have very strict credit requirements and prefer only to work with upper tier borrowers. Other lenders, like some of the bad credit loan companies that we work with, will approve you even if you are fresh to the credit scene or have had some problems.

Many people think that it is bad to shop your loan around because of the extra inquiries, but this is not true. Credit bureaus expect you to shop your loan around and inquiries within a short time period will often be considered just one. Besides, a few extra inquiries is only going to have a minimal effect on your credit score.

So, shop your loan around, being sure to apply with local banks, credit unions and a few online lending sources.

Posted by

James Car is a finance, loan and budget expert based in the United States. After attending Brookhaven college, he went on to become a successful entrepreneur. He now enjoys writing articles that help people save and make the most of their money.