How to Secure a Personal Loan With Cosigner Canada

May 03, 2024

Loans are an essential financial tool that can help individuals achieve their goals and overcome financial challenges. However, obtaining a loan can be difficult for those with poor credit, high debt, or a complicated financial history. In Canada, one solution for securing a personal loan is to have a cosigner. A cosigner can significantly increase the chances of loan approval and potentially lead to better loan terms, avoiding unnecessary high interest rates This blog will explore the concept of securing a personal loan with a cosigner in Canada, including the benefits, eligibility criteria, application process, and important considerations.

Key Highlights

Cosigners can be added to various types of loans, including a car loan, personal loans, mortgages, debt consolidation loans, student loans, and business loans.

A cosigner is someone who agrees to take responsibility for the loan payments if the primary borrower is unable to make them.

Having a cosigner can improve approval odds and potentially result in lower interest rates.

Eligibility criteria for cosigners typically include having a good credit score and a stable income.

Choosing the right cosigner is important, and it should be someone you trust and who has a good credit history.

You can compare options for online lenders for free with FatCatLoans to ensure you select the right lender.

Understanding Personal Loans with Cosigners in Canada

Personal loans with cosigners are a popular option for Canadian consumers who may not meet the traditional lending criteria set by financial institutions. A personal loan is a type of unsecured loan that allows borrowers to access funds for various purposes, such as debt consolidation, home improvements, or unexpected expenses. A cosigner, also known as a guarantor, is an individual who agrees to take responsibility for the loan if the primary borrower fails to make the payments.

One of the main reasons individuals seek personal loans with cosigners is to overcome poor credit scores or limited credit histories. Lenders often consider credit scores as one of the primary factors in loan approval decisions. A low credit score may indicate a higher risk for lenders, making it challenging for individuals to secure loans on their own. By having a cosigner with a good credit history, borrowers can improve their chances of getting approved for a personal loan.

Financial institutions in Canada typically require cosigners to have a good credit score, stable monthly income, and a strong financial background. Lenders want to ensure that the cosigner is financially capable of taking on the loan if the need arises. It is important for both the borrower and the cosigner to understand the responsibilities and risks associated with cosigning a loan. This includes the potential impact on the cosigner’s credit score and financial obligations if the borrower defaults on the loan.

Benefits of Having a Cosigner for Your Loan

Having a cosigner for your loan offers several benefits, including improved approval odds and potential for lower interest rates. A cosigner increases your chances of loan approval, especially if you have bad credit or a low credit score. They provide an additional layer of security for the lender, making them more willing to lend you money. Additionally, a cosigner with a good credit score can help you secure a lower interest rate, which can save you money over the life of the loan. Overall, a cosigner makes it easier to get a good loan.

Eligibility Criteria for Cosigners

In order to be eligible to be a cosigner for a personal loan, individuals must meet certain criteria. While specific requirements may vary between lenders, here are some common eligibility criteria for cosigners:

Good Credit Score: Cosigners typically need to have a good credit score to provide additional security for the lender.

Stable Income: Lenders want to ensure that cosigners have a stable source of income to make loan payments in case the borrower defaults.

Financial Responsibility: Cosigners should have a track record of responsible financial behaviour, including paying bills on time and managing their debts.

Trust: Cosigners should have a strong relationship with the borrower and trust their ability to repay the loan.

Selecting the Right Cosigner

Choosing the right cosigner is crucial when applying for a personal loan. Being a cosigner is a big responsibility, and it’s not to be taken lightly. Choose someone you trust and have a strong relationship with, as they will have a significant financial responsibility if you default on the loan. Many people ask family members, as they are more likely to have your best interests at heart and be willing to support you throughout the loan process.

Your cosigner should trust that you will make timely payments, as any defaults will affect their credit score. Financial responsibility entails honouring the loan agreement and ensuring consistent repayments. Understanding the implications of cosigning, both parties must communicate openly and trust each other’s ability to manage the financial commitment effectively. Building trust through transparent communication and shared financial goals is essential for a successful cosigner relationship.

Understanding the Risks for Cosigners

Cosigning a loan comes with certain risks and responsibilities for the cosigner. It’s important to understand these risks before asking someone to be your cosigner. Here are a few key points to consider:

Liability: As a cosigner, you are legally responsible for repaying the loan if the borrower defaults. This means that if the borrower cannot make the loan payments, you will be required to step in and make them.

Debt Consolidation: If the loan is for debt consolidation purposes, the cosigner will be liable for the entire consolidated debt. This includes any existing debts being consolidated and the new loan amount.

Credit Impact: Late or missed payments on the loan can negatively impact both the borrower’s and cosigner’s credit scores. It’s crucial to make all loan payments on time to avoid damaging your credit history.

Comparing Lenders for the Best Terms

Comparing lenders should be your first step if you’re interested in getting a personal loan with cosigner in Canada. You can use our free tool to get quotes, and look at different lenders based on:

Interest Rates and Fees: Compare the interest rates and fees offered by different loan options. Lower interest rates can save you money over the life of the loan, while lower fees can reduce your upfront costs.

Loan Term and Repayment Conditions: Look at the loan term and repayment conditions offered by different lenders. Consider factors such as the monthly payments, flexibility in repayment options, and any penalties for early repayment.

Reputation and Customer Service: Research the reputation of the lenders and read customer reviews. Look for lenders with a good track record and responsive customer service.

personal loan with cosigner canada

Loan Term and Repayment Conditions

The loan term and repayment conditions offered by lenders can vary, so it’s important to compare them when looking for a personal loan with a cosigner. Both yourself and your cosigner should be 100% aware of what’s in the loan contract.

Loan Term: The loan term refers to the length of time you have to repay the loan. Longer loan terms result in lower monthly payments but may result in higher overall interest paid. Shorter loan terms have higher monthly payments but can save you money in interest.

Repayment Conditions: Look for lenders that offer flexible repayment options, such as the ability to make extra payments or pay off the loan early without penalties. Consider any late payment fees or other charges that may apply.

Monthly Payments: Calculate the monthly payments for different loan terms and interest rates to ensure they fit within your budget. Make sure the monthly payments are manageable and affordable for you and your cosigner.

Managing Your Loan Responsibly

Managing your personal loan responsibly is crucial to maintain a good credit score and fulfill your financial obligations. This is especially important when you have a cosigner, since it’s not just your credit score on the line. Be sure to:

Make Timely Payments: Always make your loan payments on time to avoid late fees and negative impacts on your credit score.

Budget for Loan Payments: Include your loan payments in your monthly budget and ensure that you have enough money to make the payments.

Monitor Your Credit Score: Regularly check your credit score and monitor your credit report for any errors or discrepancies. Address any issues promptly.

Planning ahead and being vigilant is important to keep both your financial futures safe.


In conclusion, securing a personal loan with a cosigner in Canada can offer various benefits, such as improved approval odds and potentially lower interest rates. Both you and your potential cosigners should be aware of the risks and in agreement about the loan repayment process. If you are in need of funds, this can boost your chances of getting a loan, but it also carries the risk of affecting your relationships. It’s important to practice clear communication and only get a personal loan with cosigner if it’s necessary and right for you.

Frequently Asked Questions

Can anyone be a cosigner for a personal loan in Canada?

No, not anyone can be a cosigner for a personal loan in Canada. Cosigners typically need to have a good credit score, positive payment history, and a stable income to provide the necessary security for the lender. Eligibility criteria may vary between lenders, but a cosigner’s creditworthiness is a key factor in determining their suitability.

What happens if the primary borrower defaults on the loan?

If the primary borrower defaults on the loan, the cosigner becomes responsible for making the loan payments. Failure to repay the loan can negatively impact both the primary borrower’s and the cosigner’s credit scores. This can make it harder to secure future loans or limit you to higher interest rates.

How does cosigning a loan affect the cosigner’s credit?

Cosigning a loan can affect the cosigner’s credit. Late or missed payments by the primary borrower can negatively impact the cosigner’s credit score and credit report. It’s important for the cosigner to ensure that all loan payments are made on time to avoid any negative impact on their credit history.

Are there alternatives to getting a personal loan with a cosigner?

Yes, there are alternatives to getting a personal loan with a cosigner. If you have bad credit or are unable to secure a loan with a cosigner, you may consider an alternative type of loan such as bad credit loans or secured loans.