Co-signing 101: Applying for a loan with co-borrower

March 14, 2022

If you’re struggling to qualify for a loan, you can have a friend or family member step in to help. But first, both sides should weigh these considerations before signing into any financial agreement.


For college students and other young people, getting a loan typically isn’t as easy as walking into a bank and filling out some paperwork. Financial institutions understandably want to know the money they’re lending will be paid back. People who are too young to have earning power or lengthy credit histories simply aren’t attractive to lenders. In these circumstances, a co-applicant – otherwise known as joint owner – might help the primary borrower’s chances of securing a loan.

Whether you’re the young person seeking the loan or the older adult (typically a parent or grandparent) considering being a co-applicant, you’ll want to weigh the following considerations before stepping into any kind of financial arrangement.


First things first: Do you really need a loan?

To a large degree, money is personal. How you choose to spend it is, ultimately, your business. But a loan technically isn’t your money. It’s money you’re borrowing and will have to pay back – with interest. If you’re asking a parent or grandparent to be a co-applicant, be mature enough to approach them with questions already answered, perhaps written down in a proposal format:

  • Why are you seeking the loan? 
  • Is this a need or a want? If it’s a need, explain why. If it’s a want, explain your rationale.
  • What is the amount?
  • Why is that particular amount needed?
  • How is this loan going to benefit you?
  • What is your plan and timeline for paying off the loan?

Protect the relationship you have with your desired co-applicant by being completely honest about your goals. If he or she agrees to be a co-applicant, be thankful. If not, respect the decision and move on. You’ll want the same respect someday if you’re ever on the receiving end of a similar request.


The upside of a co-borrowed loan

From the standpoint of a college student or other young borrower, the upside of a co-borrowed loan is obvious: You’re more likely to get a loan. Adding a co-applicant’s financial profile – credit history, income and savings – to your application will greatly increase your chances of obtaining a loan. Not only that, but the terms of the loan (the interest rate, for example) are likely to be more favorable.

Benefits exist for the older adult serving as co-applicant, as well. For starters, you’re helping your child or grandchild establish a solid credit score, which has far-reaching financial benefits. You’re also supporting whatever life goal the loan is funding. Just be sure to enter the arrangement with eyes wide open. If you’re not going to be okay – either financially or relationally – if your co-applicant doesn’t pay off this loan, don’t enter into the commitment in the first place.


How to obtain a co-applicant loan

A personal banker can be a great resource to help you navigate the loan application process. “Often a college student will come in seeking a loan, and our response might be, ‘Unfortunately, we’re not able to do this for you on your own, but let’s talk about the possibility of acquiring a loan with a co-applicant,” says Amy Staven, manager at the U.S. Bank University of Wisconsin-Stevens Point branch. “So sometimes we’re actually introducing the option to customers, because they didn’t even know the possibility existed.”

If you already know that a co-borrowed loan is your goal, schedule a meeting with your personal banker, and bring the potential co-applicant with you to the appointment. Your banker will guide you through all of the loan options and considerations to make sure it’s a wise way to move forward.


Remember: you’re both at risk

“In a co-applicant situation, which is typical with credit-card applications for example, the responsibility of each person on the account is the same,” explains Belinda Hampton, manager of St. Louis University’s U.S. Bank branch. “It can therefore be detrimental to both applicants’ credit if the relationship goes sour, or for any other reason the balance of the loan goes unpaid.” Being clear on the potential negative ramifications of a co-applicant loan is essential.

All this said, it’s important to note that ultimately, a co-applicant loan can be an enormously helpful financial tool that makes both parties happy – and keeps them financially secure. “The financial well-being of our customers is always paramount,” Staven says. “We’re not just concerned about helping them today, we want to make sure they’re on their way to a solid financial future.”


Student loans and co-signers

Because of its popularity, student loan co-signing deserves some special attention. When parents (or grandparents, aunts, uncles, or friends) agree to co-sign a student loan, they are essentially giving control of their credit to the primary borrower. Why? Once a student loan is approved, its payment history will show up on the co-signer’s credit report – and any missed payments can hurt your credit. As with all “shared” loans, it’s important to enter into this financial relationship fully informed and fully ready to take on whatever responsibilities might be required of you as a co-signer.


Need to obtain a co-borrowed loan? Make an appointment with a banker to begin the loan process.


Related content

How to talk to your lender about debt

How grandparents can contribute to college funds instead of buying gifts

U.S. Bank asks: Transitioning out of college life? What’s next?

Tailor Ridge eBill case study

Friction: How it can help achieve money goals

6 common money mistakes to avoid

A who’s who at your local bank

Here’s how to create a budget for yourself

How to use debt to build wealth

Achieving their dreams through a pre-apprenticeship construction program

4 benefits of independent loan agents

How to avoid student loan scams

CFO survey: A shifting focus on ESG in business

Middle-market direct lending: Obstacles and opportunities

How I did it: Deciding whether to buy an RV

Take the stress out of buying your teen a car

CFO report: Driving growth via new business models and technology

CFO insights: Leading the recovery for sustainable growth

Streamline operations with all-in-one small business financial support

Beyond Mars, AeroVironment’s earthly expansion fueled by U.S. Bank

Year-end financial checklist

Checklist: financial recovery after a natural disaster

Credit: Do you understand it?

How to open and invest in a 529 plan

Personal loans first-timer's guide: 7 questions to ask

How I did it: Bought a home without a 20 percent down payment

Starting your homebuying journey: Tips from a U.S. Bank Goals Coach

Working with an accountability partner can help you reach your goals

How to stay positive when searching for a job: advice from a U.S. Bank goals coach

How to set yourself up for success in your first job

Growing your savings by going on a ‘money hunt’

How to build wealth at any age

7 ways for pre-retirees to get ready for retirement

Multiple accounts can make it easier to follow a monthly budget

Evaluating interest rate risk creating risk management strategy

You can take these 18 budgeting tips straight to the bank

Certificates of deposit: How they work to grow your money

9 simple ways to save

Are savings bonds still a thing?

Opening a business on a budget during COVID-19

What’s a subordination agreement, and why does it matter?

What’s your financial IQ? Game-night edition

How to stop living paycheck to paycheck post-pay increase

Do your investments match your financial goals?

Understanding the true cost of borrowing: What is amortization, and why does it matter?

5 financial goals for the new year

Money Moments: Tips for selling your home

Parent checklist: Preparing for college

What are conforming loan limits and why are they increasing

Does your savings plan match your lifestyle?

Do you and your fiancé have compatible financial goals?

Should you get a home equity loan or a home equity line of credit?

Retirement income planning: 4 steps to take

Your 4-step guide to financial planning

Using 529 plans for K-12 tuition

Investment strategies by age

How to manage your money: 6 steps to take

How to discuss money with your family

Good debt vs. bad debt: Know the difference

How to establish your business credit score

Key components of a financial plan

4 tips to help you save for retirement in your 20s

What is a CLO?

Checklist: 10 questions to ask your home inspector

Webinar: 11 insider tips for student debt

When to consider switching banks for your business

5 things to consider when deciding to take an unplanned trip

30-day adulting challenge: Financial wellness tasks to complete in a month

5 reasons why couples may have separate bank accounts

7 steps: How couples and single parents can prepare for child care costs

Adulting 101: How to make a budget plan

Allowance basics for parents and kids

Common unexpected expenses and three ways to pay for them

Dear Money Mentor: How do I set and track financial goals?

Finding a side gig to fund your goals

Helpful tips for safe and smart charitable giving

What you need to know about renting

How and when to ask for a raise

How can I help my student manage money?

How having savings gives you peace of mind

How to save for a wedding

How to save money while helping the environment

It's possible: 7 tips for breaking the spending cycle

Personal finance for teens can empower your child

Stay committed goals creating positive habits

Tips to overcome three common savings hurdles

Webinar: Uncover the cost: Wedding

What military service taught me about money management

Building a financial legacy for your family and community

It’s time for a fresh start: A new way of thinking

U.S. Bank asks: Do you know what an overdraft is?

U.S. Bank asks: Do you know your finances?

Money Moments: 8 dos and don’ts for saving money in your 30s

Things to know about the Servicemembers Civil Relief Act

Bank from home with these digital features

What’s in your emergency fund?

Webinar: Uncover the cost: Building a home

Money Moments: How to finance a home addition

How I did it: My house remodel

Is it the right time to refinance your mortgage?

4 questions to ask before you buy an investment property

What is a home equity line of credit (HELOC) and what can it be used for?

Webinar: Uncover the cost: Home renovation

Is a home equity line of credit (HELOC) right for you?

10 uses for a home equity loan

How to use your home equity to finance home improvements

What to know when buying a home with your significant other

Webinar: Mortgage basics: What’s the difference between interest rate and annual percentage rate?

Webinar: Mortgage basics: How much house can you afford?

Webinar: Mortgage basics: Buying or renting – What’s right for you?

Webinar: Mortgage basics: What is refinancing, and is it right for you?

Webinar: Mortgage basics: Prequalification or pre-approval – What do I need?

Webinar: Mortgage basics: How does your credit score impact the homebuying experience?

Webinar: Mortgage basics: Finding the right home loan for you

Webinar: Mortgage basics: 3 Key steps in the homebuying process

8 steps to take before you buy a home

These small home improvement projects offer big returns on investment

What is refinancing a mortgage?

How do I prequalify for a mortgage?

6 questions to ask before buying a new home

How to Adult: 7 tax terms and concepts you should know

11 essential things to do before baby comes

Webinar: Uncover the cost: Starting a family

Preparing for adoption and IVF

Closing on a house checklist for buyers

How to prepare for a natural disaster

College budgeting: When to save and splurge

Student checklist: Preparing for college

6 questions students should ask about checking accounts

Webinar: Uncover the cost: College diploma

How to save money in college: easy ways to spend less

Checklist: How to gain financial independence from your parents

The A to Z’s of college loan terms

Co-signing 101: Applying for a loan with co-borrower

Practical money skills and financial tips for college students

How to build credit as a student

5 things to know before accepting a first job offer

Learn to spot and protect yourself from common student scams

How I did it: Paid off student loans

Webinar: Bank Notes: College cost comparison

Webinar: U.S. Bank asks: Are you safe from fraud?

Everything you need to know about consolidating debts

Your quick guide to loans and obtaining credit

How to use your unexpected windfall to reach financial goals

Test your loan savvy

Should you give your child a college credit card?

Is a home equity loan for college the right choice for your student

How to apply for federal student aid through the FAFSA

Be careful when taking out student loans

Your financial aid guide: What are your options?

ABL mythbusters: The truth about asset-based lending

Collateral options for ABL: What’s eligible, what’s not?

How jumbo loans can help home buyers and your builder business

Webinar: Mindset Matters: How to practice mindful spending

Webinar: Cash management strategies for higher education

When small companies buy big: The potential of asset-based lending

How to maximise your infrastructure finance project

Webinar: Smart habits and behaviors to achieve financial wellness

Questions to ask before buying a car

What you should know about buying a car

How to choose the best car loan for you

What you need to know before buying a new or used car

Can you take advantage of the dead equity in your home?

How I did it: Turned my side hustle into a full-time job

How to get started creating your business plan

Talent acquisition 101: Building a small business dream team

Make your business legit

7 tips to help grow your business after launch

How to test new business ideas

How to fund your business without using 401(k) savings

Costs to consider when starting a business

How a small business is moving forward during COVID-19

Prioritizing payroll during the COVID-19 pandemic

5 tips to help you land a small business loan

Investing in capital expenditures: What to discuss with key partners

Can ABL options fuel your business — and keep it running?

Managing the rising costs of payment acceptance with service fees

3 reasons governments and educational institutions should implement service fees

Tech lifecycle refresh: A tale of two philosophies

At your service: Outsourcing loan agency work

Maximizing your infrastructure finance project with a full suite trustee and agent

An investor’s guide to marketplace lending

Higher education and the cashless society: Latest trends

Start of disclosure content

Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rate and program terms are subject to change without notice. Mortgage, home equity and credit products are offered by U.S. Bank National Association. Deposit products are offered by U.S. Bank National Association. Member FDIC.

U.S. Bank is not responsible for and does not guarantee the products, services or performance of U.S. Bancorp Investments, Inc.