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You might need assistance from a relative, a spouse, or a close friend if you’re having trouble getting approved for a car loan. You have a better chance of being approved for the loan you want with interest rates you can afford if you have a cosigner who is willing to apply for the loan with you.
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Note from the Editor: This article’s content is solely based on the author’s opinions and suggestions. It might not have received approval from any of our network partners through reviews, commissions, or other means.
We all need help from time to time.
You might need assistance from a relative, a spouse, or a close friend if you’re having trouble getting approved for a car loan. You have a better chance of being approved for the loan you want with interest rates you can afford if you have a cosigner who is willing to apply for the loan with you.
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Cosigning a car loan: Pros and cons
A cosigner can help you get a loan approved, but it’s also a significant commitment. Before asking someone to cosign your loan, keep the following in mind:
Why you might need a car loan cosigner
Not everyone is qualified to be approved for a car loan by themselves. To help you qualify for a loan, you might need a cosigner for the following reasons:
If you fall into one of these categories, a lender might advise you to find a cosigner before submitting an application. Having a cosigner lowers the risk of the lender losing money on the loan because it gives them a second person to turn to for payments.
Cosigner rights and responsibilities
Contrary to popular belief, a cosigner is not a reference for one’s character. The truth is that cosigners must assume the same level of legal and financial responsibility for the loan as you do.
Even if you intend to pay the entire balance of the car loan on your own, the lender has the right to charge you late fees and missed loan payments. Additionally, despite sharing the same liability as you, the cosigner is not permitted to use the vehicle without your consent.
However, a cosigner may ask the lender for billing statements and late notices.
How does cosigning a car loan work?
Being a cosigner is comparable to submitting your own loan application. The cosigner should think about their ability to pay the full amount of the loan payment each month for the duration of the loan before accepting any offers.
Here’s how to apply for a loan if you’re both prepared to make the commitment:
If you are accepted, remember the date of your next payment and take any additional actions necessary to set up your regular, on-time payments.
Risks of cosigning
Your cosigner must agree to share in your financial obligations for the loan. That indicates that they must sign the loan agreements and commit to making the payments if you are unable to.
The following is what your cosigner will risk in order to support you:
Remember that if you both fail to make your car payments, you could both experience these consequences. However, if you make timely payments on your auto loan, your credit scores and those of your cosigner are likely to rise.
Where to find auto loans with cosigners
Since many lenders accept cosigners, it might be difficult for you to select one.
Try a bank where you already have an account to begin with. Banks and credit unions frequently have some of the lowest interest rates for car loans, and they might even give you a discount if you’re already a customer.
In order to compare several lenders at once, you can also search the LendingTree online marketplace. Even more specific features, such as loans with low loan amounts or for borrowers with poor credit, can be filtered.
For in-house financing, you could also go through a car dealership, but this should be your very last option because dealerships typically have the most expensive auto loans.
Frequently asked questions
There is no minimum credit score required to obtain a car loan. Some lenders might not have a minimum credit score requirement for your cosigner, while others might have a minimum of 670. Generally speaking, the higher the score, the better your chances are of being accepted.
Having a cosigner can help reduce your car payment. Your monthly payment might be lower if the cosigner enables you to qualify for lower interest rates. Alternately, you could extend the loan’s term over a greater number of years to lower your payments. Just be aware that this strategy will cost you much more money in the long run because you will accrue more interest fees.
Find out what’s preventing you from getting a loan if you want to qualify on your own. Lenders might decide that you need to work on establishing your employment history, repairing your credit, paying off debt, or putting aside more money for a down payment. You can also look for a lender with less stringent qualifications, but doing so usually results in higher borrowing costs.
It’s challenging, but not impossible, to have a cosigner taken off of a loan. Your loan agreement may contain a provision allowing you to release the cosigner on your auto loan after a certain number of on-time payments, for example. You could try refinancing your auto loan or selling the vehicle to pay off the loan early if the lender doesn’t permit this.
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FAQ
How much does it help to have a cosigner on a car loan?
When lenders see that a third party is guaranteeing your loan, they are more likely to give you permission to borrow. Improve your chance of good terms. Lower rates may also be obtained with a co-signer who has excellent credit—a score of at least 670—and a high income.
What credit score does a co-signer need for a car?
Typically, lenders will demand that a prospective cosigner have a credit score of 700 or higher. People with credit scores in this range and above are typically very thrifty and pay their bills and other obligations on time. Your cosigner must also have excellent credit if you have bad credit.
Is it easier to get a car with a cosigner?
A cosigner with a protracted history of good credit, however, is different. The likelihood that the lender will accept this repayment is higher. Therefore, you might have a better chance of getting a loan or getting better terms if you can convince a cosigner to support you.
Can you be denied a car loan with a cosigner?
A cosigner isn’t a cure-all for every situation. They can “lend” you their excellent credit score to help you meet auto loan requirements, but if your credit reports contain significant negative marks or you don’t meet other requirements, you might still be turned down for a car loan even with a cosigner.