If you cannot get a loan approval on your own, some lenders will ask you to get a cosigner. However, it is not always feasible to borrow with a cosigner. If you do not know anyone who is willing to put his credit on the line to cosign your loan, here is some useful info for getting loans with bad credit and no co-signers:
Basics of cosigning
Lenders usually assess your application to see if you are likely to pay back what you owe. Primarily, a lender will look at two things: your accessible income to repay the loan and your credit scores. If you do not think that you can pay the loan back by yourself, a cosigner might be necessary.
A cosigner will have to make payments if you default and he is 100% on the hook for your debt. Adding a cosigner gives lenders another person to collect from as well as two potential incomes. This is why having a cosigner with a high income or strong credit score can be very beneficial to your application.
What to do if you do not get approved
If a lender refuses to approve your loan, you should not just take his word for it. You can try the following solutions but keep in mind that some work better than others do:
Build your credit
If you cannot get a loan without cosigning your loan due to your bad credit, you should work to improve your credit. Whether you have never had the chance to establish your credit or you have missed a few payments, you should start building your credit immediately.
If you are under 21 years, improving your credit will be a challenge. Therefore, you should try to get a cash secured loan or a small credit line from a credit union.
Sometimes you might have errors on your credit report that hold you back. The key to improving your credit is fixing such errors.
A bank approves or denies a loan based on how much money from your income goes towards your monthly payments. To figure this out, they usually calculate your debt to income ratio, which should be as low as possible. If you have higher income from a part-time job, you might be approved because the loan will seem affordable.
Lenders might deny you a high loan amount, but if you borrow less, you could get the money without requiring a cosigner. Do some calculations to see how different amounts have different monthly payments – lower monthly payments result in a much better debt to income ratio. A bigger down payment might also improve your loan to value ratio, making a loan more attractive to lenders.
Expand your search
If you have been told no before, just remember that there are other lenders in the world. You should consider shopping around with smaller institutions such as credit unions and regional banks. Some online lenders are willing to loan money to people with bad credit.
Pay down your debt
Your available monthly income and credit score are affected by your current debts. Therefore, you should pay down your debt to make getting new loans easier. After you finish paying off your debts, your credit score will rise in a matter of days.
You can use an asset that you already own as collateral and borrow against it. Unfortunately, this is quite risky as you might lose your property if you fail to repay the loan. If you choose to borrow money against your car, the financial institution can repossess it.