Consumer Car Buying Advice Blog

Cosigning a bad credit car loan means you are as responsible as the primary borrower for making those monthly payments

Been there

If you’re reading this you may be thinking about becoming either a cosigner or co-borrower on a bad credit auto loan. We’ve seen this before, because at Auto Credit Express we’ve been helping car buyers that have poor credit for over two decades.

Due to this, we even created a web site that includes a secure bad credit auto loan application after seeing the embarrassment and frustration these customers often encounter. Applicants are then matched with dealers in their area that specialize in customer credit issues, giving them their best chance for a second chance auto loan.

The alternative is normally a tote the note car dealer, not a good option since these dealers don’t report to the credit bureaus about a loan or loan payments. Unfortunately, taking out a loan from a dealer with a bad credit lender without being realistic can also create problems and either situation can end up in repossession.

Another fact of life is that bad credit borrowers may not be able to rebuild their car credit on their own. This means that there is the possibility that they may need an additional person on the finance contract in order to qualify for auto loans for bad credit. There are also two different ways this can be handled, and if the banks know the difference, you should too.

Co-borrowers

There are two ways of adding an individual to the finance contract of a bad credit auto loan. An individual can be added as a co-signer, or a second person can be added as a co-buyer. Although the terminology used is different, there are a number of things that are similar when it comes to both co-signers and co-buyers:

1.    Both a co-signer and a co-buyer are considered a co-applicant and, as such, they are equally responsible for the loan. If the primary borrower is unable to meet the loan obligations, than the co-signer or co-borrower is expected to make those payments.

2.    Both a co-signer and a co-buyer are signatories on the loan. This means that in addition to the primary borrower, the co-signer or co-borrower appear on the loan and signs the loan documents.

3.    Both a co-signer and a co-buyer, along with the primary borrower, can be subject to collection action that includes wage garnishment in the event the loan goes into default.

4.    During the loan application process, the lender will review the credit reports of the co-buyer or co-signer and take their credit information into consideration during the approval process.

Income treatment

While the credit histories of both types of co-applicants will be taken into consideration, lenders treat the incomes of each type differently. In fact, the bank will classify a co-applicant as either a co-signer or a co-buyer depending on how their income relates to that of the primary borrower.

Co-buyer – This individual’s income can be added to (commingled with) the applicants income in order to meet the income requirements of the lender. The total income of both individuals is used to qualify for the loan. In most instances, this would mean that the co-signer is the husband or wife of the applicant.

Co-signer – While the credit score of this individual will be considered in meeting the credit requirements of the loan, the co-borrower’s income will not be added to that of the borrower in order to meet the income requirements of the loan. This means that the incomes of both the primary borrower and the co-borrower have to individually qualify for the income requirements of the loan.

Co-borrower qualifications

As a rule, it is easier for someone to qualify as a co-applicant if they are related to the primary borrower. As was stated previously, wives and husbands are usually recognized and treated by the lender as co-buyers on a loan. Fathers, mothers, sisters, brothers, grandmothers, grandfathers as well as sons and daughters who are co-applicants are usually considered to be co-signers, since their incomes usually cannot be co-mingled with that of the primary borrower.

As we see it

Auto Credit Express specializes in placing customers with bad credit with dealers that can help them. These affiliate dealers are knowledgeable and work with a broad spectrum of lenders to ensure you have your best chance at getting approved for a car loan.

So if this is the case and you are serious about getting your car credit back on track, you can begin by filling out our bad credit car loan application now.

Tags: Bad Credit, bad credit auto loan, bad credit car loan, co-borrower

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