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A personal loan cosigner is someone who adds themself to a loan application along with the primary borrower. By taking this step, a cosigner — who typically has good credit — can help an applicant who has a poor credit score or thin credit history get approved for funding.

However, cosigning does come with risks: The cosigner is as liable for the debt as the primary borrower. If the primary signer can’t make payments, the cosigner is expected to swoop in and make them instead. If loan payments are late or the loan goes into default, both signers will likely see their credit score take a hit.

Understanding Cosigning

As mentioned above, a cosigner is someone who adds their name to a loan application, taking on equal financial responsibility for the loan. Their credit history, income, and other financial qualifications will be part of the materials provided for the loan application. A cosigner’s solid credit score and history can substantially increase the approval odds for primary borrowers with little credit history (or a poor one).

By becoming a cosigner, you might enable a close friend or family member to get approved for a personal loan at a more favorable rate and/or for a higher amount.

Cosigning examples: It’s common for parents to cosign student loan applications for college students, whose credit files are likely still thin. Or if you’ve had some negative credit events (such as late payments) on your file for a few years but are ready to buy a new car, enlisting a cosigner could help you successfully close the deal — and potentially qualify for a lower interest rate.

In the case of a personal loan, it is likely to be an unsecured term loan at a fixed interest rate that the primary borrower is seeking. If approved, these funds could be used for anything from car repairs to travel expenses to a home improvement project.

An important note: Understand the difference between a loan guarantor vs. cosigner. If you are a guarantor, your responsibility only kicks in if the loan goes into default, but as a cosigner, you are as legally responsible for the debt as the primary applicant at every step along the way. This means that if that applicant makes late payments, the cosigner’s credit history and score can be negatively impacted.

If the debt is unpaid and goes to collections, both cosigner and guarantor could face a court case and potentially have their wages garnished.

Benefits of Cosigning a Personal Loan

The upsides of cosigning a personal loan include:

•   Adding a cosigner can increase the odds of approval for the primary borrower, possibly unlocking financial products and milestones they otherwise wouldn’t reach. For instance, they might use a personal loan to consolidate credit card debt, thereby freeing up funds to pay off a student loan.

•   In addition to gaining approval, enlisting a cosigner could help the primary borrower snag a higher loan amount and/or a lower interest rate.

•   For cosigners themselves, adding their name to a loan could potentially build their credit history in the long run. It might, say, increase their credit mix, which could be a positive factor, as long as the loan is paid on time each month.

In these ways, cosigning could benefit your financial standing.

Recommended: How Cosigning Affects Your Credit

Risks of Cosigning a Personal Loan

The risks of a personal loan with a cosigner should not be taken lightly:

•   Should the primary borrower fail to make payments and end up defaulting on a personal loan, the debt is as much the cosigner’s responsibility as the borrower’s.

•   If the primary applicant makes late payments on the loan — or fails to make payments at all — those factors will impact the cosigner’s credit file just as they will the primary applicant’s. That’s true up to and including legal suits.

•   Cosigners are usually people you’re close to in life (like family members or dear friends). For this reason, enlisting or becoming a cosigner has the potential to strain interpersonal relationships if something doesn’t go as planned. How would you feel if you were a cosigner on your sibling’s personal loan and they failed to make payments, leaving you saddled with debt? It’s worthwhile to think through this kind of worst-case scenario before agreeing to cosign.

•   The basic act of cosigning a loan can also negatively impact a cosigner’s credit, even if the debt is managed well by the primary applicant. An example: The loan could increase the overall amounts owed, possibly lowering your credit score. In addition, adding your name to the application could ding your credit score a bit for a brief period since a hard credit inquiry will be involved.

Even if you are eager to help a friend or family member snag a personal loan by serving as a cosigner, it’s important to evaluate these risks before diving in.

Legal Implications of Cosigning

While it usually doesn’t happen until a debt has gone unpaid for a long time, it is possible for a collections agency to take borrowers — including personal loan cosigners — to court.

If the judge rules in their favor, the collector could potentially garnish your wages, place a lien on your property, or freeze funds in your bank account. These are reasons why it’s so important for cosigners to ensure they’re actually capable of repaying a loan in the primary applicant’s stead if necessary.

Factors to Consider Before Cosigning

If you’re considering doing someone the (big) favor of applying for a personal loan as a cosigner, here are some factors to think through carefully before you sign your name on the dotted line.

•   Your own credit history. Consider whether your credit history is strong enough to help the primary borrower successfully apply for a personal loan in the first place. If your credit is also only so-so, the application may be denied — or subject to a higher interest rate, which could make repayment more difficult.

•   Your financial goals. While cosigning a personal loan could be an altruistic act, don’t be totally selfless. This decision could have a negative impact on your credit history or even your cash flow if you end up being the one to take over the payments. Be sure to consider your own financial goals when weighing your options.

•   Your relationship to the person asking. Cosign a loan only for someone you trust will do everything in their power to repay the loan on time. Also keep in mind that if something goes awry, your relationship to that person may end up strained. Even if the only hit you take is emotional and not financial, that can still have a profoundly negative impact on your life.

Recommended: Personal Loan Guide for Beginners

How to Protect Yourself as a Cosigner

If you do decide to be a personal loan cosigner, here are some ways to help protect your financial situation.

•   Draft a written contract with the primary applicant. While verbal promises can go a long way, having a written document stating both parties’ expectations — and outlining what actions will take place if they’re not met — can be invaluable if something goes wrong.

•   Ask if you can be a guarantor instead. Being a guarantor on a loan allows the primary applicant to enlist your help as a financial backer. However, it stops short of conferring the full responsibility of the loan on you. Instead, if you’re a guarantor, you’ll only become responsible for the loan if it goes into default (which is a serious consideration in its own right, but somewhat less entwined than a cosigner role).

•   Monitor your credit score. Given the impact cosigning a loan could have on your credit, it’s a good idea to enroll in a free credit score monitoring program to help keep you abreast of any sudden changes. (Credit score monitoring is often a good financial move even if you’re not cosigning a loan.)

•   Ask for copies of each month’s statements. Remember, this loan is just as much yours as theirs. Ask for — and keep — copies of all loan paperwork, from the original agreement to each monthly statement, so you’re up to date on exactly where the loan stands.

The Takeaway

If you have a solid credit history when you cosign a personal loan, you can help increase the primary applicant’s chances of being approved. However, you also take full legal responsibility for the debt. Be sure you only do so in situations in which you trust the primary borrower implicitly and could afford to take on the debt if that person were to default.

If you are in the market for a personal loan, with or without a cosigner, see what SoFi offers.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

FAQ

What happens if the primary borrower defaults on the loan?

If the primary borrower defaults on a loan, the creditor (and possibly a collections agency) will turn to the cosigner. That means the loan in default could negatively impact the cosigner’s cash flow, credit history, and credit score. The situation could even end up leading to a court case for the primary borrower and cosigner. That’s why it’s important to think carefully before cosigning a loan.

Can I remove myself as a cosigner from the loan?

It may be possible to remove yourself as a cosigner — but it might not be a simple process. Removing the cosigner often makes the loan a riskier prospect for the lender, so they might do what they can to keep you on the file. If you can’t get a simple cosigner release, the primary borrower may need to take out a new loan, on their own, to pay off the one you cosigned. This would then release you from the debt.

Does cosigning a loan affect my ability to get other loans?

Yes, it could. Think of cosigning just like applying for a loan for yourself. Along with the hard credit check (which could slightly and briefly lower your credit score), the entire loan will also show up on your credit report, potentially increasing your overall amounts owed and your DTI, or debt-to-income ratio. These factors could negatively impact your credit score and make getting another loan harder.

Photo credit: iStock/Moyo Studio

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

This article is not intended to be legal advice. Please consult an attorney for advice.

SOPL-Q324-020

As home repairs go, plumbing leaks can range widely. A typical small leak can cost $250 to $500 on average in 2024, not counting cleanup. But hidden pipe failures that take longer to discover and more major issues that send H2O spraying everywhere can easily lead to thousands of dollars in water damage.

The best way to minimize plumbing repair costs is to stay vigilant to potential problems and to fix even little trickles quickly. Here, you’ll learn more about the different levels of plumbing leaks and the typical cost of cleanup and repairs.

Common Types of Plumbing Problems

Water leaks can happen anywhere in the home — not just the bathroom or kitchen. That’s because plumbing systems can be as complex as a spider’s web. Plumbing leaks can cause damage ranging from the trivial to the catastrophic, with repair costs to match. Supply chain issues and inflation can drive the cost up even further.

Smaller Plumbing Leaks

Leaking sinks and toilets are the most obvious and least damaging kind of plumbing issue. If you’re lucky, a trickling noise will alert you before the flood waters rise. While there’s no exact plumbing repair cost calculator, the leak itself typically can be fixed for $125 to $350.

However, hidden leaks can spread quickly and easily erode your cabinetry. Leaks that occur around the base of your faucet can also damage your countertop. Surface or cabinet repairs can cost a few hundred dollars — not including the price of new materials.

Garbage disposals can spring a leak in a number of places. Depending on the scale of the issue, it might be possible to DIY the repair. But if the garbage disposal needs to be replaced, you’ll pay about $225 including parts and labor.

Larger Plumbing Leaks

Leaks behind the walls can go undetected for some time. Contrary to what homeowners like to believe, many leaks don’t cause any change in water pressure or visible wall stains. (Plumbing issues are just one reason why the cost of a home inspection is worth it.)

Leaks stemming from water-using fixtures can also travel through walls to any room in the house. Eventual signs may include a lingering musty smell, mold, and dampness of the surrounding flooring or drywall.

The real doozy with repairing this kind of leak is that you usually have to cut into your wall to fix it, with wall incision and repair amounting to most of the cost. While the actual leak repair will often run to several hundred dollars, when you add in the diagnosis (made after carving into your wall) and wall repair, it can all add up to $1,000 or considerably more.

Water heater leaks can damage the foundation of a house and ruin any property kept in the lowest level of your home. Beyond the damage that the leak itself may cause, the problem triggering the leak can also prove costly. If your water heater is damaged, often through sediment buildup in the tank, it may need to be replaced. A new water heater can cost around $1,300 for a tank-based unit and labor.

Disaster Plumbing Leaks

Some plumbing leaks can be a lot worse than others, and slab leaks can be among the very worst. This type of leak occurs when the pipes under the foundation start to leak. Repairs for a slab leak can be costly if you have to remove flooring and jack-hammer through the foundation.

Homeowners should keep an eye out for a decrease in water pressure, warped hardwood floors, warm flooring, and moist patches. Slab leaks can be pricey to diagnose and pricier to fix, costing an average of $2,200 according to Angi.com.

Washer leaks are another common yet costly water problem. The water leading to your washing machine is constantly running, so any leaks will continually push water into your walls and flooring and flood your home fast.

To appreciate the total cost of a major basement flood, another significant issue, you’ll want to consider water removal, cleanup, ventilation, and decontamination, as well as any building and structural repairs. There may also be costs associated with the replacement or cleaning of personal property and mechanical equipment. Final price tags vary greatly but can be as much as $16,000.

Repair Costs by Type of Leak

Another way to look at the cost of plumbing leak repairs is by the type of leak. Here are some numbers for first-time homebuyers and homeowners to consider.

Water Line Leak

Water line leaks can have a wide range of price tags, from $500 to $5,000, depending on the degree and location of the problem.

Waste Line Leak

The cost of this kind of repair can depend on the length of the pipe needing repair, as well as how much damage the sewage leak caused. That said, the average price is currently around $4,000, though small repairs might be only about $650.

Heating Line Leak

Not all systems can experience this kind of plumbing leak. You will usually find this issue with boilers vs. furnaces. If your home does have a boiler and a pipe fails, you could pay anywhere from $150 for the repair of a small, accessible leak to a few thousand or more for a difficult-to-access or major leak.

Recommended: What Is a Credit Card Consolidation Loan?

Fixing the Leak

While minor leaks in accessible areas can be fixed by a competent homeowner, it can pay to call in the pros for an assessment and for assistance with larger problems. When it comes to how to find a contractor, consider the following:

•   Ask trusted friends or neighbors for references. Good word-of-mouth can be important.

•   Read online reviews. There are trusted sites with robust listings of local professionals.

•   Make sure that any plumbers you are considering are licensed (plumbing is a highly regulated field of work) and carry adequate liability insurance.

•   Get a few quotes, compare them, and check references.

While there are no guarantees, homeowners can help avert plumbing disasters by staying on top of regular maintenance, being alert to the signs of hidden leaks, and responding rapidly if they suspect a problem. As mentioned above, a gradual decrease in water pressure can indicate a leak or buildup in the pipes. Another red flag is a sudden increase in your water bill.

Not letting minor problems progress can help you avoid a major plumbing repair bill (and as a general policy, can help you avoid other common home repair costs, too).

Financing a Plumbing Leak

Homeowners dread plumbing problems due to the widespread damage they can inflict. Caught early, a simple under-the-sink leak can set you back just a couple of hundred dollars. But major leaks and floods can end up costing tens of thousands of dollars in professional water removal, cleanup, decontamination and mold remediation, wall and floor restoration, and property replacement. That can leave a person scrambling to pay for emergency home repairs.

If you do wind up with a big-ticket plumbing repair, consider these sources of funding:

•   Emergency fund: If you’ve followed the advice about setting aside three to six months’ worth of living expenses in an emergency fund, then this could be the time to dip in and finance a repair.

•   Personal loan: A personal loan can provide a source of cash for almost any purpose, from a plumbing repair to a vacation. This kind of unsecured loan can often be quickly obtained and at interest rates below that of credit cards.

•   Home equity: Tapping into a home equity loan or line of credit could unlock funds for a major plumbing repair. With these options, you are using your home as collateral (meaning the lender could seize it if you default) and may be able to access money at a competitive rate. However, the process can take a few or several weeks, as it requires a home appraisal.

•   Credit card: Charging a plumbing repair can be a quick and simple solution, but keep in mind that credit cards typically charge high rates of interest that can lead to credit card debt.

•   Friend or family loans: Borrowing from a friend or relative could be how to pay for plumbing repairs. Just be sure you can repay your debt to avoid causing issues with the relationship while getting your emergency plumbing assistance.

Recommended: Personal Loan Calculator

The Takeaway

Plumbing repairs can cost from a couple of hundred dollars to tens of thousands, depending on how big and complex the leak is and what kind of damage it has done to a home. To pay for a major plumbing repair, you might access your emergency fund, a personal loan, or home equity options, among other sources. Tackling small repairs (before they grow in scope) can be a smart way to avoid major plumbing problems.

Thinking a personal loan might be a good option for a home repair? See what SoFi offers.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

FAQ

What is the most common plumbing leak?

Bathroom plumbing fixtures, perhaps because they are used so often, tend to be the most common source of residential plumbing leaks. Toilets and their tanks in particular can frequently require the help of a plumber to repair a leak.

How much does the average plumbing leak repair cost?

The average pipe leak repair can cost between $250 to $500, although major leaks, with resulting damage, can cost considerably more.

How much do most plumbers charge an hour?

Depending on your location and other factors, a plumber can charge on average $45 to $150 per hour. There may be a minimum charge for a plumber to visit and assess a leak. This is often a flat fee between $50 and $200.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOPL-Q324-059

For many of us, a car is the second-biggest purchase we’ll make, next to a home. The average price a buyer paid for a new car in June 2024 was $48,644, according to Kelley Blue Book. But sticker price isn’t the only thing to consider when budgeting for new wheels. There’s also insurance, maintenance, gas, and depreciation.

Depreciation may not be front of mind for many car buyers. But in fact it’s a major factor in determining how to finance a new car. We’ll explain why, review different loan options, and recommend steps you can take to help you get a great deal.

How To Assess the Value of a Car

You may already know what you want in a new car: the gas mileage, capacity, features. Just as important, you know what you can afford. Or do you? Before heading to a dealership, you’ll want to extensively research the cars you’re interested in.

Once you have an idea of the makes and models you want to test drive, there are a number of services that can offer a baseline estimate for the car’s worth. Edmunds offers a True Market Value (TMV®) guide; Kelley Blue Book provides suggested price ranges based on things like year, model, condition, and mileage (particularly useful for used cars). The National Automobile Dealers Association’s guide focuses on dealers’ sticker prices, and Consumer Reports provides detailed reviews and reports about specific cars.

None of these resources will necessarily tell you the exact price you’ll get, but they can give you some context. It may be helpful to look at listed prices for similar cars in your area. You can even call around for price quotes from dealerships and private sellers, so you’re better equipped by the time you walk onto the car lot.

Got a car to trade in? Here’s how to find out how much your car is worth.

How the Value of Your Car Changes Over Time

A car’s value changes almost from the moment you purchase it: This is called depreciation. The first year is generally the biggest hit, with cars losing around 20% or more of their original value. The loss goes on from there. New cars lose roughly 60% of their purchase price over the first five years of ownership.

Some models depreciate more than others. For instance, cars typically depreciate faster than trucks, and midsize cars depreciate more quickly than smaller cars. It’s smart to research the projected depreciation on the makes and models you’re interested in. Lower depreciation could become a deciding factor when all else is equal.

Recommended: How Much Should I Spend on a Car?

Car Financing Options

One of the biggest car-related costs is the loan itself. Car loans can come either from a traditional bank, online lender, or through a dealership. Here are a few car financing options:

Car Loan

Car loans can be offered directly from a bank, credit union, or online lender, or can be arranged through the car dealer. The average loan rate for a new car for borrowers with good credit is 7.24%, as of July 2024. If you have excellent credit, you may qualify for a lower rate; if you have fair or bad credit, you may pay more. Learn how to check out your credit score for free.

Car loans are “secured” by the car, which means that the car is used as collateral on the loan. Until it’s paid off in full, you don’t own the car outright. So if you default, the lender can seize the car. The qualification process for a car loan can be more difficult than getting an unsecured personal loan, since banks must verify the collateral (think: more paperwork).

Dealer-Arranged Financing

When getting a loan through the dealership, the dealer typically collects your information and offers financing via a finance company owned by the car manufacturer, the dealership, or a third party. Car dealerships are good at helping customers get a car loan quickly, sometimes even without great credit. You may be able to sign a loan and drive off in your new car the same day.

Auto Loan from a Private Lender

Banks, on the other hand, may offer more competitive interest rates or more favorable terms when applying with them directly. However, the application process can be more involved and take longer. Usually, borrowers getting financing from a bank or credit union will get preapproved for a car loan prior to heading to the dealer.

Personal Loan

Another option is to skip car loans entirely and take out an unsecured personal loan. Common uses for personal loans include home repairs, debt consolidation, and other large purchases. On the flip side, a car loan can only be used to pay for a car.

Usually, buying a car with a personal loan is not the best course of action. But there are rare circumstances where it may make sense, such as if you plan on restoring an old car as a passion project. Cars in need of repair can be difficult to finance with a traditional auto loan.

For most car buyers, however, interest rates on any type of personal loan are typically higher than on car loans. Another thing to consider is the repayment period. In general, car loans extend over seven years, whereas a personal loan is typically repaid in three to five years.

Getting your personal loan approved can take time, but prequalification is available. Many people get prequalified before going into the dealership, so they have an idea of how much buying power they have.

Strategies for Getting a Car Loan

As you look for a car loan that meets your needs, here are some strategies that can help.

Do Some Research

Before heading to the dealer, shop around for loans to see the interest rates and terms you may qualify for. Lenders review factors like a borrower’s credit score and financial history to inform their borrowing decisions. So part of your research will go into understanding your credit.

Recommended: What Credit Score Do You Need to Buy a Car?

Prepare a Down Payment

A larger down payment can save you money on your loan. Down payments reduce the amount you have to borrow, which reduces what you spend on interest over time. Trading in a vehicle of substantial value accomplishes the same thing, while reducing the down payment you need to put up.

A higher down payment is helpful for another reason: It can help you avoid a situation down the road where, due to depreciation, the balance of your loan is greater than the value of your car. This is variously called negative equity, being underwater, or an upside-down loan. To avoid this situation, run the numbers to make sure your down payment (or trade-in) is high enough to offset the expected depreciation on your vehicle.

That said, negative equity isn’t usually a bad thing. It only becomes a problem if your car is stolen or totaled, and the payout from your insurance company isn’t enough to pay off your loan balance. (Gap insurance is designed to cover your remaining debt.) Some drivers are comfortable with being upside-down for a short period, while others prefer not to take a chance.

Consider Getting Prequalified for a Loan

Getting prequalified for a car loan helps the borrower understand what kind of car payment they can afford. Prequalification can also be used as a tool in negotiations with the dealer. In some cases, the dealer may be willing to offer a more competitive financing option.

Just keep in mind that prequalification isn’t a done deal: The loan offer is still subject to change.

The Takeaway

For many people, buying a car outright with cash isn’t an option. With an auto loan, the car acts as collateral to secure the loan. A higher down payment can save you money on interest over the life of the loan. It can also help you avoid “negative equity” down the road — where the value of the car is less than the balance of your loan. However, this is only a problem if your car is stolen or totaled, and your insurance company’s payout doesn’t cover your loan obligation. In some circumstances, it’s possible to use an unsecured personal loan to purchase a car, such as when you’re looking for a vintage car to fix up as a passion project.

Why get a SoFi Personal Loan? SoFi offers loans of up to $100,000, low fixed rates, and a quick and easy online application process Checking your rate takes just a minute.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOPL-Q324-032

If you want to borrow a large amount of cash but need to prove additional household income, your spouse may be able to help. You cannot simply list a spouse’s income with, or instead of, your own if you apply in your name alone. However, you can list their income if your spouse agrees to become a “co-borrower” on the loan.

Here’s a closer look at when and how you can use your spouse’s income on a loan application.

What Is a Personal Loan?

A personal loan is a type of installment loan that is paid back with interest in equal monthly payments over a set term, which can range from one to seven years. Personal loan interest rates tend to be lower than for credit cards, making them a popular option for consumers who need to borrow a large amount. Common uses for personal loans include major home or car repairs, medical bills, and debt consolidation.

There are different types of personal loans. Unsecured personal loans are the most common. These are not backed by collateral, such as your car or home.

Recommended: What Is a Personal Loan?

Checking Your Credit

Before you decide whether to include your spouse’s income, gather this information to assess your own financial standing.

Credit Report

Lenders will look at your full credit history to evaluate your creditworthiness, so it’s smart to review your credit reports before applying for a loan. You can request a free credit report from each of the three major credit bureaus — Equifax, Experian, and TransUnion — through AnnualCreditReport.com.

When you receive your reports, review them closely and make a note of any incorrect information. If you see any mistakes or outdated information (more than seven years old), you can file a dispute with the credit bureau(s) reporting the error.

If you have a limited or no credit history, consider taking some time to build your credit before applying for a loan.

Credit Score

Next, take a look at your credit score. You can often get your credit score for free through your bank or credit card company. The minimum credit score requirement for a personal loan varies from lender to lender. Broadly speaking, many lenders consider a score of 670 or above to indicate solid creditworthiness.

While there are personal loan products on the market designed for applicants with bad credit, they typically come with higher interest rates.

Debt-to-Income Ratio (DTI)

Your debt-to-income ratio (DTI) is the amount of debt you have in relation to your income, expressed as a percentage. Although some personal loan lenders may be willing to work with borrowers with DTIs as high as 50%, your chances of being approved for a personal loan and getting a good rate are higher if your DTI is below 42%. If your DTI is too high, you have two options: pay down your debt, or increase your income.

Shop Around Online

Shop around and “prequalify” with different lenders to compare the interest rates and monthly payments you’re offered with your income alone. When you’re comparing lenders, keep an eye out for any hidden fees, such as origination fees, prepayment penalties, and late fees. A personal loan calculator shows exactly how much interest you can save by paying off your existing loan or credit card with a new personal loan.

Now that you have a firm grasp of your financial standing, you can assess whether you need to include your partner’s income as part of your application.

Using Your Spouse’s Income

First, the bad news. You cannot simply use your spouse’s income or your combined household income, even with their permission, when applying for a personal loan in your own name.

Now for the good news. If your partner has a strong credit history and income, they can become a secondary “co-borrower” on the loan. A co-borrower can help improve your chances of approval, along with the interest rates and terms you’re offered.

What Is a Co-Borrower?

A co-borrower applies for the loan alongside you. Both of your financial information is taken into consideration, and both of you are responsible for paying back the loan and its interest.

Let’s look at the pros and cons of this arrangement.

Pros of Using a Co-Borrower

Because co-borrowers have equal rights, the arrangement is well-suited for people who already have joint finances or own assets together. Using a co-borrower allows you to present a higher total income than you can alone. A higher income signals to lenders that it’s more likely you’ll be able to make the monthly loan payments.

Plus, if you manage your loan well, both your credit histories will get a boost over time.

Cons of Using a Co-Borrower

Each borrower is equally responsible for repayment over the entire life of the loan. If the primary borrower cannot make the payments, that could negatively impact the credit of both parties. It’s important to have confidence in a co-borrower’s ability to repay the loan.

The loan will appear on both of your credit reports as a debt, which can affect the ability of one or both of you to get approved for another loan down the line.

Co-borrowers also have equal ownership rights to the loan funds or what the loan funds purchased, so trust is a big factor in choosing a co-borrower.

Applying for a Personal Loan with a Co-Borrower

The basic process of applying for a personal loan is the same no matter the number of applicants. The lender will likely ask both of you to provide certain information up front:

•   Personal info: Photo IDs, Social Security numbers, dates of birth

•   Proof of employment, and your employment histories

•   Proof of income

The lender will then run a hard inquiry of your credit reports, which might temporarily ding your credit score by a few points. Depending on the complexity of your application, you can expect to get your personal loan approved in one to ten days.

The Takeaway

You cannot simply list your partner’s income along with, or instead of, your own when applying for a personal loan in your own name. However, if your spouse agrees to become a co-borrower on the loan, both your incomes and credit histories will be considered. This can increase your chances of getting approved, qualify you for a larger loan, and/or give you access to better loan rates and terms. The catch is that both parties have equal responsibility for paying back the loan, and any late or missed payments can negatively affect both your credit scores.

If you’ve explored your options and decided that a personal loan is right for you, it’s wise to shop around to find the right loan. Consider personal loans from SoFi, which offers loans of up to $100,000, low rates, and a quick and easy application process. Checking your rate takes just a minute.

FAQ

Can my wife use my income for a personal loan?

Your wife can use your income for a personal loan only if you agree to become a co-borrower on the loan application. That gives you equal ownership of the funds, but also equal responsibility for paying back the loan. How your wife manages her loan payments can affect both your credit scores — for better or worse.

Can you use someone else’s income for a loan?

You can use someone else’s income for a loan only if they agree to become a co-borrower on the loan. That gives them equal ownership of the funds, and also equal responsibility for paying back the loan. This is a common arrangement between spouses, and between a parent and child.

Can a stay-at-home parent get a personal loan?

A stay-at-home parent may be able to get a personal loan if they have a strong credit history and can provide proof of income to show they can make the payments. Without that, they may need to find a co-borrower. A co-borrower’s credit and income can be used to help the primary borrower qualify for a loan, or access better interest rates and loan terms. However, a co-borrower will have equal ownership of the funds, and equal responsibility for repaying the loan. Using a spouse or parent as a co-borrower is a common arrangement when a stay-at-home parent cannot qualify on their own.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOPL-Q324-031

Thrift Savings Plans (TSPs) are retirement plans for federal employees and members of the uniformed services. They offer the same kinds of benefits and tax advantages that private employers can offer their employees through a 401(k).

Like 401(k)s, TSPs allow savers to take out loans from their own savings. Borrowing against your retirement can be risky business, so it’s important to understand the ins and outs of TSP loans before you make a decision.

What Are Thrift Savings Plan Loans?

A TSP loan allows federal workers and uniformed service members to borrow from their retirement savings. They must pay interest on the loan; however, that interest is paid back into their own retirement account. In 2024, interest rates are 4.50%, typically lower than the rate private employees pay on 401(k) loans.

Before you can borrow from your account the following must be true:

•  You have at least $1,000 of your own contributions invested in the account.

•  You must be currently employed as a federal civilian worker or member of the uniformed services.

•  You are actively being paid, as loan repayments are deducted from your paycheck.

•  You have not repaid a TSP loan in full within the last 30 days.

How Do Thrift Savings Plan Loans Work?

There are two types of TSP loans. General purpose loans may be used for any purpose, require no documentation, and have repayment terms of 12 to 60 months.

Primary residence loans can only be used to buy or build a primary residence. They must be repaid in 61 to 180 months, and they require documentation to qualify. You cannot use primary residence loans to refinance or prepay an existing mortgage, add on to or renovate your existing home, buy another person’s share in your home, or buy land only.

Recommended: Recommended: Common Uses for Personal Loans

Pros and Cons of a Thrift Savings Plan Loan

As you weigh whether or not it’s a good idea to borrow from your retirement savings, consider these pros and cons.

Pros of a TSP Loan

Chief among the advantages of borrowing from a TSP are the relatively low interest rates compared to most other loans.

What’s more, you can get access to funds pretty quickly and repayment is simple, coming from payroll deductions. Also you don’t need to submit to a credit check to qualify for the loan.

Cons of a TSP Loan

Despite the benefits, borrowing from a TSP is often considered a last resort due to certain disadvantages.

First and foremost, when you borrow from your retirement you are removing money from your account that would otherwise benefit from tax-advantaged compounding growth.

If you leave your job with an unpaid loan, you will have 90 days to repay it. Fail to meet this deadline and the entire loan may be reported as income, and you’ll have to pay income taxes on it.

In addition, TSP loans are not reported to the credit reporting bureaus, so they don’t help you build credit.

Does a Thrift Savings Plan Loan Affect Your Credit?

TSP loans are not reported to the three major credit reporting bureaus — TransUnion, Equifax, and Experian — so they do not affect your credit score.

Recommended: How Do I Check My Credit Score Without Paying? 

How Long Does a Thrift Savings Plan Loan Take to Get?

Applying for a TSP is a relatively simple process. You can fill out an application online on the TSP website . There is a $50 processing fee for general purpose loans and a $100 fee for primary residence loans. Borrowers who are married will need spousal approval before taking out a loan.

Once the application is approved, borrowers typically receive the loan amount via direct deposit or check within three business days.

How Much Can You Borrow From a Thrift Savings Plan?

The minimum you have to borrow with a TSP loan is $1,000. Rules for determining your maximum are rather complicated. You’ll be limited to the smallest among the following:

•  Your own contributions and their earnings in your TSP.

•  $50,000 minus your largest loan during the last 12 months, if any.

•  50% of your own contributions and their earnings, or $10,000, whichever is greater, minus your outstanding loan balances.

According to these rules, $50,000 is the most you can borrow, and you may be limited to as little as $1,000.

Should You Take Out a Thrift Savings Plan Loan?

Because a TSP loan can have a lasting effect on your retirement savings, you’ll want to be sure to exhaust all other loan options before deciding to apply for one. If you are experiencing financial hardship or poor credit has made it hard for you to qualify for another type of loan, a TSP may be worth exploring.

Thrift Savings Plan Loan Alternatives

Before choosing a TSP loan, take the time to research other alternatives.

Credit Card

Credit cards typically carry very high interest rates. The average interest rate as of August 2024 is 27.62%. That said, if you use a credit card to make a purchase and pay off your debt on time and in full at the end of the billing cycle, you will not have to pay interest on your debt.

Credit cards only get expensive when you carry a balance from month to month, in which case you’ll owe interest. What’s more, the amount of interest you owe will compound. In order to carry a balance, you must make minimum payments or risk late penalties or defaulting on your debt.

Recommended: Differences and Similarities Between Personal Lines of Credit and Credit Cards

Passbook Loan

Passbook loans allow you to borrow money at low interest rates, using the money you have saved in deposit accounts as collateral. That money must remain in your account over the life of the loan. And if you default on the loan, the bank can use your savings to recoup their losses.

Signature Loan

Unlike passbook loans, signature loans do not require that you put up any items of value as collateral. Also known as “good faith loans,” signature loans require only that you provide your lender with your income, credit history, and your signature. Signature loans are considered to be a type of unsecured personal loan.

Personal Loan

A personal loan can be acquired from a bank, credit union, or online lender. They are typically unsecured loans that don’t require collateral, though some banks offer secured personal loans that may come with lower interest rates.

Loan amounts can range from a few hundred dollars to $100,000. These amounts are repaid with interest in regular installments.

Personal loans place few restrictions on how loan funds can be spent. Common uses for personal loans range from consolidating debt to remodeling a kitchen.

The Takeaway

For borrowers in a financial pinch, TSP loans can provide a low-interest option to secure funding. However, they can also have a permanent negative impact on retirement savings, so it makes sense for borrowers to explore other options as well.

SoFi offers low fixed interest rates on personal loans of $5,000 to $100,000 and no-fee options.

FAQ

What does TSP loan stand for?

TSP stands for Thrift Savings Plan, a retirement account the federal government offers to its civilian employees and members of the uniformed services.

What is a TSP loan?

A TSP loan allows Thrift Savings Plan holders to borrow from their retirement account. Loans are repaid automatically through payroll deductions, and interest payments are made back to the account.

How long does it take to get a TSP loan?

Once processed, the proceeds of your TSP loan will generally be disbursed within three business days.

Photo credit: iStock/SDI Productions
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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