When a co-signer makes sense for your next car loan
A co-signer can help you get approved for your next car loan, but not in all situations.
Co-signers can help in many situations
The co-signers sign the loan agreement with you and take some responsibility for the car loan. They promise to help pay off the loan if you, the main borrower, can’t. They “lend” you their good credit rating and can help you get a car loan more easily than if you had to apply on your own.
In short, a co-signer supports you and vouches for you, and this helps you get approval for vehicle financing.
Many borrowers use a co-signer, but this is not a one-size-fits-all solution. Here are some scenarios in which a co-signer could help you take out your next car loan:
- You have bad credit – Bad credit can make it difficult to obtain a car loan, as some traditional lenders may consider a low credit score to be risky. A co-signer with a good, long-standing credit history lowers your risk as a borrower, making them more likely to get that approval.
- You have no credit history – Borrowers with limited or limited credit history who have not proven (on paper) that they are able to manage credit may be asked to have a co-signer. The co-signers promise to pay off the car loan if you are unable to do so, reducing the risk to the lender. Many first-time car buyers or young borrowers ask a parent or family member to co-sign so they can take out their first car loan, but a co-signer can be anyone who is not your spouse. .
- You want a lower interest rate – Your credit score is the biggest indicator of your interest rate on a car loan. If your credit rating doesn’t provide the interest rates you prefer, a good credit rating from a co-signer could help you qualify for a lower rate.
- Your credit doesn’t make the cut – Even if your credit is not considered “bad”, some auto lenders have high credit score requirements. If you’re looking for a specific car loan deal and your credit score isn’t quite there, then a co-signer might be the answer.
Co-signers can be very helpful for borrowers with credit problems. If the reason you want a co-signer is not listed above, you might need another solution.
When a co-signer can’t help
In some situations, a co-signer isn’t the right fit – they can’t help every borrower get approved for a car loan in all scenarios. Here are some examples of when a co-signer does not make sense:
- Your income does not meet the requirements – Co-signers cannot add their income to yours to help you meet income requirements. Their income is considered separate from yours, and they must meet their own income requirements, just like you, in order to qualify as a co-signer.
- Cannot meet the deposit requirement – Auto lenders almost always require that a down payment not be borrowed money. If you are considering a co-signer because you want them to help you deposit requirement, but they loan you the money to do it, it might not work in your favor. In most cases, the down payments should come from your own pocket or from the trade-in value.
- Your credit reports have too many bad scores – While co-signers can help borrowers with credit problems, serious red marks can be difficult to cross. Things like a rejected bankruptcy or a recent repossession of a vehicle usually reduce your chances of getting approved, and sometimes co-signers can’t help in these situations.
If a co-signer is not the right choice for your situation, then subprime financing may be what you need to secure a vehicle.
Subprime auto financing
Subprime auto lenders are registered with special financing concessions, third style. They work remotely through certain dealerships and assist borrowers in many different situations. For borrowers with bad credit without a co-signer or those with tarnished credit reports for whom a co-signer cannot help, risk financing could be your solution.
These lenders take a closer look at your financial situation as well as your credit history. Subprime lenders look at your employment history, debt to income ratio, down payment amount, living expenses and circumstances, etc. If you meet the basic requirements of a subprime lender, you may not need a co-signer at all to take out a car loan.
The tricky part of getting a subprime car loan is often finding a dealership that has signed up with them – but we can help you with that.
Let us do the legwork
Here has Auto Express Credit, we connect bad credit borrowers to dealerships with subprime lenders. Skip the search for a special financial dealer by filling out our free form auto loan application form – we will do the research for you at no cost and without obligation so that you can get into the vehicle you need.