If your credit score isn’t the best but you want to qualify for a better interest rate or boost your odds of getting approved for an auto loan, then consider getting a cosigner.
Cosigners Can Help Bad Credit Borrowers
Cosigners help borrowers get approved by “lending” you their good credit score when you apply for a car loan. They also agree to pay for the vehicle note if you’re unable to. This adds more security to the loan, and boosts your chances of getting approved despite having a lower credit score.
There isn’t a blanket rule as to what your cosigner’s credit score needs to be, but it needs to be higher than yours. If you’ve been asked to have a cosigner by a previous lender or a financial advisor, odds are, your credit reports contain some damage or you’re a new borrower.
If you ask a cosigner to help you get approved for an auto loan and their credit score is similar to yours, it’s probably not going to boost your chances that much compared to someone with a score in the 700s or better.
Most borrowers ask a family member to cosign. They don’t have to be related to you, though, or even live in your home state. The only person that can’t cosign on your loan is your spouse, since they’d become a co-borrower (they help with income shortages, not poor credit).
When you have a cosigner on a car loan, you’re responsible for making the payments yourself – without their help each month. While the cosigner has promised to pay the monthly note in case you’re unable to, it’s considered a last resort.
A cosigner doesn’t get any rights to the vehicle that they cosigned for, since their name doesn't get added to the title. This means that the cosigner can’t take the car from you, but their credit can still be impacted by how you handle the loan.
Everyone’s Credit Is Affected
Cosigners can be a great way to turn your credit around for the better. Auto loans can build your payment history because they tend to last for years, and a completed one looks good on your credit reports. However, you can’t forget about how the loan can impact the cosigner!
Cosigners take on some risk when they agree to help you increase your approval odds. If you get approved with a cosigner, then it’s important to handle the car loan with care for your credit and theirs.
Both your and the cosigner’s credit scores are impacted by how the loan is handled. This means if you make all your payments on time, then your credit and the cosigner’s credit can see an improvement – which is great news for everyone! Just remember that the opposite is true, too. If you start to miss payments, your credit and the cosigner’s credit see damage.
Assure your cosigner that you can manage the loan well, and choose loan terms that can benefit your credit in the long run.
Not Sure About a Cosigner?
The cosigner isn’t there to help you make payments each month. If you’re concerned about not having enough income to pay for a vehicle alone, then a co-borrower might be more your speed.
If you have the income and you’re ready to take on an auto loan, but aren’t sure you know anyone that can cosign for you, then consider a subprime car loan. These auto loans are for borrowers with credit issues, and the lenders that offer them look at more than just your credit score.
If you have to go it alone to get into your next vehicle, then start right here at Drivers Lane. We’ve cultivated a network of dealerships all over the country, and we know which ones work can assist bad credit borrowers. Fill out our free and secure car loan request form, and we’ll look for a dealer in your area that has the resources you need for your credit situation.