What Are the Requirements for Loan Co-signers?

A co-signer needs sufficient income to cover repayment of a borrower's loan.

A co-signer needs sufficient income to cover repayment of a borrower's loan.

Couples who need a co-signer on a loan are going to need someone who is willing to let a lender peer into his personal finances. A lender requires borrowers to get a co-signer when they can’t meet a bank’s lending standards on their own. In turn, co-signers must show they have a credit history and income that meets those standards to help borrowers get a loan.

Promise to Pay

A co-signer guarantees repayment of a borrower's loan, so couples who ask someone else to co-sign on a car loan or mortgage are actually asking that person to commit to paying off their loan if they don't. A lender will require the co-signer to sign a contract guaranteeing repayment of the loan. Co-signers must also commit to paying any late fees added to a loan if the borrower falls behind on payments.

Good Credit

Lenders sometimes require borrowers to get co-signers when they have a poor credit history or a short credit history that doesn't provide sufficient information on how well they manage debt. Lenders’ requirements for co-signers’ credit scores vary, but someone who has a score of 700 or above is more likely to be accepted as a co-signer than someone with a lower score. Lenders typically classify people with scores of 700 and beyond as prime borrowers because they've established a good debt-repayment history.

Sufficient Income

Banks require co-signers to submit documents, including pay stubs, that show they have sufficient income to pay off a co-signed loan if necessary. Borrowers won’t get a loan if it appears their co-signer is already deep in debt. Lenders generally prefer to see a debt-to-income ratio of 36 percent or less, according to Experian; this includes payments on the loan to be co-signed. Lenders calculate the ratio by adding up the monthly payments shown on a co-signer's credit report and dividing the resulting number by the co-signer's pretax monthly income.


Lenders typically like to see that a co-signer has a stable work and residence history. A lender may view a loan application more favorably if the co-signer has lived at the same address for at least five years, for instance. A bank may deny a loan if a co-signer switches jobs frequently, because the co-signer's employment appears unstable. An unstable work history can lead to a denial, even if the co-signer earns a high income.


About the Author

Frances Burks has more than 15 years experience in writing positions, including work as a news analyst for executive briefings and as an Associated Press journalist. Burks has banking and business development experience, and she has written numerous articles on consumer issues and home improvement. Burks holds a bachelor's degree in political science from the University of Michigan.

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