Auto loans and financing are available for those with bad credit or less than perfect credit. However, if someone has very bad credit or cannot meet the requirements of the lender, they may need a little extra help. When an applicant isn’t able to get approved by a special finance on their own, they may need a cosigner. Having a qualified cosigner can give a bad credit buyer a better chance at loan approval. However, the primary borrower and the appointed cosigner should both be fully aware of the risks involved. Here are some reasons for a cosigner with an auto loan.
How a Cosigner Helps with Getting Approved for an Auto Loan
Did you know that you can effectively “borrow” another person’s credit score? This is basically what you’re doing and the reasons for a cosigner with an auto loan when you get a close friend or family member to cosign your loan. Say, for example, you have poor credit, but your sister has a great credit score. If she agrees to cosign your auto loan, the lender can use her good credit in order to approve the loan.
Of course, it must be understood that a cosigner agrees to share responsibility for the loan with the primary borrower. This means that if you get financed for a vehicle purchase with a cosigner and default on the loan, your cosigner is obligated to make the car payments.
Not only that but because your loan also belongs to your cosigner, it will show up on their credit report. So, if they need to take out a loan of their own down the road, this additional debt could affect their ability to get approved for financing. The responsibility that comes with being a cosigner is a significant burden to bear. This is why you should only ask someone close to you to cosign your loan. Your strong relationship with this person should also make it easier to stay in constant communication. After all, you will definitely want to keep your cosigner in the loop with issues concerning the loan that you share.
Requirements that a Cosigner Should Have
If you’re planning on financing a new or pre-owned vehicle, and you’re pretty sure that you’re going to need a cosigner, you should choose someone who is qualified to fill the role. Here are a few requirements that a potential cosigner must meet:
- A Good or Excellent Credit Score
- An Income that Can Be Garnished
- Not a Large Amount of Existing Debt
Once it is clear that your intended cosigner meets these basic qualifications, they should accompany the primary buyer to the dealership in order to fill out and sign the necessary paperwork. Just make sure that they know ahead of time that once the papers are signed, they cannot back out of the deal. In fact, a cosigner will only be released from their obligation to the loan when one of two things happens. Of course, once the car is paid for, both the cosigner and the primary borrower will be free of the loan. Or, if the main buyer’s credit score improves enough to allow them to refinance the loan on their own, the cosigner can be dropped from the contract.
Giving You a Better Chance at Auto Loan Approval
If you need to finance a vehicle purchase with bad credit, Overdrive Automotive Center will work hard to find a solution that works for your situation. Even if you’ve been turned down before, we can get you approved and back on the road fast.
Just fill out our simple and secure online application to get started today.