If you don't have a great credit score or a large income, you might have to ask for help in order to get a loan or an apartment. What's the best way to go about it?
Asking for help is never easy. You’d probably rather come across as someone who can take care of themselves all on their own. But asking for help shouldn’t be seen as a sign of weakness. In fact, knowing when to ask for help is one of the most important skills you can have.
But asking someone for help is even harder when it’s not just your pride on the line. It’s difficult to know exactly how to ask someone else to put something, whether it’s their money or even just their reputation, on the line for you.
If you need a personal loan but you can’t get approved for one, that means asking someone to be your cosigner. How might you approach that?
Why do I even need a cosigner?
You can sign on your own. You have a perfectly good signature. Why do you need a cosigner?
Odds are it’s because you want a loan or a lease and you can’t get it on your own. Maybe your credit is bad or maybe your income isn’t high enough. Or it could be both!
And needing a cosigner isn’t anything to be ashamed of. In some cities, you could need an annual income of more than forty times your monthly rent to sign a lease on an apartment by yourself. There’s no reason to feel embarrassed about having a less than extravagant income.
In addition to how much money you earn, a lousy credit score—or even a so-so score—could mean needing a cosigner with better credit to help you get a loan or a lease for an apartment.
Even if the person you’re asking is a good friend or family member, it can be awkward. You’re asking them to have a pretty significant amount of trust in you because if you don’t make your payments on time, it’ll negatively affect the cosigner’s credit—and they could be on the hook for payments you don’t or are unable to make!
Choose your cosigner wisely.
But where should you turn for a cosigner? Obviously, you’ll want someone who has the necessary income or credit score to actually help you get what you’re looking for. And it will need to be someone you trust who also trusts you.
But there are other things to consider when choosing who to ask, as we learned when we spoke to Casey Stubbs, founder of Finance and Markets:
“When I first left the military to start going to college for my undergraduate degree, I too had to find a cosigner myself as I did not qualify to even rent an apartment on my own. What worked for me was simply to make sure that I had collateral that could cover my cosigner should something have happened to me, and finding someone who no longer needs to rely on credit as they already have paid off their house and their cars. If your parents have already paid their house off and have no intention of moving, chances are they could care less about their credit score dropping a few points during the application process, and they can be a great resource as well for you to start building credit on your own.”
So if you know anyone who you’re close with who doesn’t have to worry about their credit, it should be easier to get them on board. But regardless of who you ask, it’s important to ask in the right way.
Show them that you are trustworthy.
As we said at the start, asking for help isn’t always easy. So it helps to make sure you’re asking in a way that is likely to be well-received.
“If you cannot find someone who is indifferent to their credit score because they are still relying on credit heavily in their everyday lives,” advised Stubbs, “your best solution is to show them that you have the means to cover the debt, and that it is simply that you do not have enough to cover the bank’s standard, but that you do indeed have something to cover their loses should something happen to you down the line.”
It can also help if you present your case to the cosigner with the same preparation and consideration you’d give a bank.
“If you’re going to ask someone to be a cosigner on a loan or a lease, there are a couple of things you should do up front,” explained Michael Gerstman, CEO of Gerstman Financial Group. “First, you should insist on putting it in writing that you are committed to repaying the note under the terms of the note. That means no late payments.
“There should be a “personal penalty” for a default. For example, if I default on this loan, I’ll be cleaning your house once a week for the next three years. When both parties have ‘skin in the game’ the chances for a default are more limited.”
“I’d also make sure that if someone is agreeing to cosign a loan or lease they recognize I’d rather cut off my arm than default on a payment.”
But as long as you work out a payment plan and stick to it, you should be able to get the loan or lease you need without cutting off any limbs. Show that you have a plan and ask for help, and you’ll probably find that people will do what they can for you.
Michael Gerstman, ChFC, CLU, has been in the financial field for over 25 years. Michael is committed to helping clients make informed financial decisions and strives to use his knowledge, experience, and commitment to help people enjoy a comfortable lifestyle today while building towards a financially secure future tomorrow.
Casey Stubbs is a United States Army Veteran and lifelong entrepreneur dedicated to helping investors from all walks of life achieve financial freedom and abundance in their lives. After launching his first website, Winner’s Edge Trading, Casey has gone on to launch several other successful brands such as Trading Strategy Guides, Learn To Trade For Profit, and Finance and Markets (@FinanceMarkets1); all dedicated towards helping investors at every level learn how to profitably manage their investments, as well as their personal finances, for themselves.
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