With their relatively low APRs and easy application processes, it's easy to see why personal loans are more popular than ever. According to TransUnion's Q4 2024 Quarterly Credit Industry Insights Report, 24.5 million people had outstanding personal loan debt at the end of 2024, up from 19.9 million in 2021 — a 23% increase.

You can use a personal loan for many things, such as to consolidate high-interest debt, cover an emergency vet bill, or finance new appliances. However, to qualify for a loan, you typically need good to excellent credit and a steady source of income. If you have less-than-stellar credit, you may need some help qualifying for a loan.

When you apply for a loan, you can typically add a co-signer or co-borrower to your application to improve your odds of approval. Because the co-applicant shares responsibility for the loan, lenders are more willing to approve you and give you a lower rate than if you applied on your own.

Personal loans usually allow joint applicants, or co-borrowers, rather than co-signers. Continue reading to learn about the difference between these borrower types and how it affects your loan.

Secured loans, such as home or auto loans, often allow co-signers, which can allow you to borrow a higher loan amount and qualify for a lower rate. By contrast, personal loans are unsecured, meaning they don't require any form of collateral. Because they're based solely on your credit, personal loans usually have stricter eligibility criteria for borrowers and joint applicants; personal loans tend to require co-borrowers rather than co-signers.

We analyzed 17 leading personal loan lenders, including major banks, credit unions, and online lenders, and found that none of them allowed co-signers. However, nine of them did allow joint applications or co-borrowers.

While the terms sound similar, a co-borrower is very different from a co-signer:

Co-signing doesn't give you ownership over the loan or access to the loan funds. Instead, the co-signer acts like a safety net. If you don't keep up with your payments and default on the loan, the lender can go after the co-signer for the payments.

A co-borrower, also known as a joint applicant, shares full ownership of the loan. They can use the loan funds, and they share equal responsibility for repayment.

When you submit your personal loan application, the lender reviews the following information:

• Credit score: Your credit score is a three-digit number used by financial institutions to estimate how likely you are to pay back a loan on time and to determine your interest rate. Your credit score is calculated based on your payment history, the length of time you've had credit cards or loans, your available credit, and how often you apply for new credit.

• Debt-to-income ratio (DTI): DTI is a measurement of your total debt compared to your gross monthly income, which is used to gauge whether you can afford your monthly payments.

• Income: Besides DTI, lenders often have minimum income requirements. For example, lenders may automatically disqualify borrowers who earn less than $25,000 per year.

• Loan use: Some lenders offer different rates for certain loan uses. For instance, you may qualify for a lower rate if you intend to use the loan for debt consolidation rather than financing your dream wedding.

If you don’t meet a lender’s requirements — say, your credit score is too low or you have insufficient income — you won't qualify for a loan by yourself. But if you apply for a loan with a co-signer or co-borrower, the lender will take their credit score, DTI ratio, history, and income into account too.

Assuming the co-signer or co-borrower has good credit and a reliable source of income, the lender may approve your application. Remember, though, that every lender has different risk tolerances, so even with a co-signer, you should still shop around to find the best loan and interest rate.

Adding a co-borrower to your personal loan application may allow you to qualify for a higher loan amount or lower interest rate than you'd get as a sole applicant. However, there are some downsides to keep in mind.

With a co-borrower, the lender reviews the other applicant's income and credit in addition to your own. If your co-borrower has a strong credit score and income, their presence on the application improves your odds of getting a loan. When you're in a bind and need cash fast — for example, if your dog needs emergency surgery or you need to pay for car repairs so you can get to work — adding a co-borrower can help you get the money you need quickly.

Because the co-borrower shares responsibility for the loan, the lender takes on less risk. As a result, they often will give you a lower interest rate than you'd get by yourself. Over time, that lower rate can help you save hundreds or thousands of dollars.

You can typically qualify for a larger loan amount than you'd get as a sole applicant. With your co-borrower's income and credit profile considered in the mix, the lender is willing to issue larger loans. When you have a large expense — such as a kitchen remodel — the higher loan limit can come in handy.

Picture this: Your aunt acts as a co-borrower on your loan application to consolidate your credit card debt. But, consolidating your debt didn't work as well as you expected, and you've fallen behind on your payments. Your aunt is scrambling to cover the monthly payments, stretching her budget. Think about how awkward it would be to sit across from her at Thanksgiving or other family gatherings until the loan is repaid.

Disagreements over money can be devastating to relationships, so only ask someone to serve as a co-borrower if you can afford the payments and have plans in place to manage the debt.

The co-borrower is equally responsible for the loan. It shows up on their credit report as an outstanding loan, and the loan will be included in their DTI. If they need to apply for another form of credit, such as a mortgage or car loan, the personal loan could limit their ability to qualify.

If you fall behind on the payments and the co-borrower isn't aware and doesn't make them either, both you and your co-borrower will see your credit scores significantly decrease. The lender will report the late payments to the major credit bureaus, so you could see your score drop by 60 points or more after a single missed payment.

If you miss the payments and the loan is sent to collections, the co-borrower is equally responsible for the loan's repayment, as well as collection costs and late fees.

It’s not always possible to find a co-signer for a personal loan — or it may not be worth the risk to your relationship — but there are alternative options and loan products to consider.

Some lenders, particularly nonprofit credit unions, offer second-chance loans or payday loan alternatives. These loans are specifically designed for borrowers with past credit issues who need quick emergency loans.

These loans tend to have higher rates than traditional personal loans, but they're more affordable than payday loans, with easier-to-meet qualification requirements. You can use the National Credit Union Administration locator tool to find a credit union near you.

Eligibility requirements and rates vary by lender, so it's a good idea to shop around. For example, some lenders exclude borrowers who are self-employed, while other lenders allow self-employed applicants as long as they have proof of income, like a tax return.

If you have a hard time qualifying for an unsecured loan, look for a lender that offers secured personal loans. For example, Upgrade has personal loans secured by car titles.

Because these loans are backed by collateral, they tend to accept lower credit scores than traditional personal loans.

If you can’t qualify for a personal loan — with or without a co-signer — consider applying for a credit card instead. This can be especially helpful if you need money quickly and you’ve been denied an emergency loan.

As a type of revolving credit, credit cards give you consistent access to a credit limit. As you make purchases, your available credit falls, with every payment increasing your available credit once again.

While you still need to apply and qualify for a credit card, issuers can manage your risk by instituting a low credit limit and/or high interest rate. This means a credit card may not be the ideal alternative to a personal loan, but responsible use can help you build credit or finance a major purchase.

In addition, secured credit cards — which use a deposit as collateral — can help you establish and build credit.

Read more: Personal loan vs. credit card

To avoid taking out a personal loan with a co-signer or co-borrower, work on establishing and building your credit. But how?

• Become an authorized user: Ask a family member or friend to add you to one of their credit cards as an authorized user. Authorized users can use the cardholder’s credit card and, more importantly, share the card’s credit history.

• Have a diverse mix of accounts: Lenders want to see your ability to manage multiple different types of debt, including revolving credit (like credit cards) and installment accounts (like loans). This can contribute to as much as 10% of your FICO score.

• Make your monthly payments on time: Payment history makes up to 35% of your FICO score, so late and missing payments add up. Paying your bills on time (or getting current) increases your credit score and makes you a more attractive borrower.

• Avoid high credit utilization: Your credit utilization rate is determined by dividing your total debt by your total available credit. The more debt you take on compared to your total available credit, the higher your credit utilization rate. In general, lenders prefer that you maintain a credit utilization rate of less than 30%, which shows you don’t rely on credit or debt to get by.

Easier said than done, right? But you may need to make some more drastic changes to better your finances. For example, to improve your income, you may need to apply for a new job, ask for a promotion or raise, or take on a side hustle. Or, you may need to slash your expenses by downsizing your apartment or getting a roommate.

Sticking to a strict budget and automating savings in a separate bank account can also help you improve your finances over time. These steps can help you qualify for a loan in the future — or avoid needing one altogether.

When you take out a personal loan with a co-borrower, their credit is pulled at the same time as yours. If the loan is approved, they are on the hook for the loan's repayment. If you don't make payments, you both will experience credit score drops, and the loan could be sent to collections.

Anyone you trust can be a co-borrower, including a significant other, parent, sibling, relative, or friend. Ideally, your co-borrower will have very good to excellent credit and a steady source of income.

No. You only need a co-borrower for a personal loan when you are unable to qualify on your own. If you have good credit and a full-time job, you can likely qualify for a loan on your own. But, sometimes adding a co-borrower can allow you to take out a larger loan or qualify for lower rates.

This article was edited by Alicia Hahn.