Scroll Top
19th Ave New York, NY 95822, USA

Can I Apply For a Loan on Behalf of a Relative?


Applying for any loan can be easy, whether you need a payday loan or you just need to borrow $1000 for a one off emergency expense. However, equally, there are some complications which may make applying for a loan of any kind difficult and you should always check an individual lender’s lending criteria before you start your application.

If you are wondering whether or not it is possible to take out a loan on behalf of a relative though, the short answer is yes you can. There are various different loan types as well as many lenders that allow borrowers to take out loans on behalf of a friend or relative for varying amounts; some of these loans are secured and others are unsecured personal loans. However, this should always come with some serious thought and discussion beforehand, as if you apply for a loan on behalf of a relative for example and they default, you may end up being liable for the repayments, fines and penalties.

Is it Legal to Take Out a Loan for a Relative in The US?

The answer is yes, it is legal to apply for a loan on behalf of a relative or friend in the US. The reason that this is accepted is because the lender will be relying on you to repay it and will make the decision as to whether or not you are a ‘safe’ borrower. They will look into your credit score and your wage against the loan amount to ensure they trust you will repay it. Furthermore, there are some loans, like guarantor loans, where the loan by its nature will require a third party or additional person to act as a guarantor for the loan.

What Are The Benefits of Getting a Loan on Behalf of Someone Else?

The most obvious benefit of getting a loan on behalf of someone else is that you will be able to help your friend or relative in need and ensure that their financial situation can be improved, by being able to borrow money online for example. If your relative is trustworthy and repays the debt to you in time, meaning that no repayments have been missed, you may actually increase your credit score. However, it is not uncommon, as with other matter concerning money, that getting involved in a friend or relative’s financial affairs can put pressure on any relationship which you may wish to avoid.

Another benefit is that your relative or friend may simply not have a bank account or perhaps they have no fixed address. In these cases, although they may still be comfortably able to repay a loan, applying on their behalf may act as a big help to help them out of financial trouble.

What Are The Alternatives To Help a Friend or Relative Struggling Financially?

The safest option, which ensures that there is no friction between you and said relative, is to lend the money yourself without going through a lender. The benefit of this is that there won’t be any interest added and the potential to damage your credit score could even be eliminated. However, there are other options that you and your friend or relative should consider before you decide that one of you applies for a loan on behalf of the other.

[table id=16 /]

What Are The Most Common Loans People Get on Behalf of Someone Else?

There are a few options that people can opt for when it comes to applying for a loan for someone else. However, the most common loans that people get on the behalf of others are payday loans, guarantor loans, secured loan options (like mortgages) or short-term loans. The reason for this is because they all offer small, medium and in some cases even larger loan amounts that are to be repaid over a varying time period. Lenders do not necessarily exclude people from applying on behalf of someone else, but they will generally advise you to consider it very carefully before proceeding.

What Are The Risks of Getting a Loan on Behalf of Someone Else?

As with any loan, there are always risks involved, however, getting a loan on behalf of a relative adds more vulnerability on your behalf. We have curated a list of our top 3 risks involved with getting a loan on behalf of someone else:

Not Being Returned the Loan Amount in Full

By taking out a loan on behalf of a relative, you are putting yourself at risk of not receiving the full loan amount back. It may be the case that the person needing the loan is going through a financial struggle and it could extend past the loan amount and leave you out of pocket and liable to pay the penalties and late fees to the lender.

Jeopardizing Your Relationship

Money is always a tricky issue and is famous for creating tough decisions in relationships and friendships. Although your relative might seem genuine (and probably is at the time of asking) a loan borrowed on their behalf might allow a person’s ugly side to shine through if they suddenly don’t have the means to repay you. This goes without saying, that it could potentially end your friendship or relationship with this person if things turn sour.

It Could Harm Your Credit Score

Just as it may increase your credit score and help you access loans and credit in the future if repayments are made on time, it has the potential to damage your credit score, too. Once payments are missed, you will be confronted with penalty fees and a credit score in despair.

What Should I Consider Before Applying for a Loan on Behalf of Someone Else?

Helping your friend or relative might be important for you, but how do you know what to do to ensure you have covered yourself in case the repayments aren’t being made from your friend? Here is a list of the most important things to consider before applying for a loan on behalf of someone else:

  • How well do you know this person? Are they reliable? Can their financial situation change rapidly? Be sure to create not just a verbal contract with them, but have it in writing that they are to repay you ‘x’ amount over ‘x’ time period

  • Be sure to include all of the added expenses on top of the actual loan amount. This can be the interest rate (which is usually quite high on a short-term loan) and any other relatable fees.

  • Be truly aware of the responsibility that falls onto you. Although you are doing a good thing for your relative, you must be fully aware that the repayments fall directly to you by law.