How to Find a Cosigner for a Car Loan?

How Much Does A Cosigner Help On an Auto Loan?

A cosigner can help a lot. In fact, a cosigner can be the difference between loan approval and denial in some cases.

A cosigner’s main purpose is to “lend” you their good credit score and promise to pay for the car loan if you’re unable to. With two people on the loan responsible for the balance, using the cosigner acting as the backup payer if you’re unable to pay, there’s less of a chance for default so it increases your chances of getting approved for financing despite a lower credit score.

A lender may not necessarily care too much about who your cosigner is since their biggest concern is making sure they have good credit and enough income to cover your payments if you head down the path of default.

Factors To Consider When Choosing a Co-Signer

Cosigners must meet the same requirements as you when they help you apply for an auto loan. However, their credit must be better than yours.

There are many important factors to consider when choosing a cosigner, especially if you can't use a friend or family member. Close family and friends are the most common go-to for borrowers who need a cosigner.

Topping the list of what to consider when choosing a cosigner is credit score. A lender won't typically accept a cosigner who has a credit score of less than 670. Additionally, cosigners must be able to make loan payments on your behalf if you're unable. This means that a lender will check their debt-to-income (DTI) ratio before proceeding.

Lenders don't like to see a debt ratio that's too high. This means that if around 30% or more of your income is taken up by debt lenders may not look on you as favorably to take on a loan, and this goes for your cosigner as well.

How Do Cosigner-Finding Websites Work?

There are a few sites out there that can get you a cosigner by connecting you with strangers who have good credit, but it’s not free. A few of these sites require an application fee and if you’re accepted, then you choose a cosigner and pay them for their help.

Cosigner-finder sites that connect you to cosigners function a little bit like dating sites, in that you complete an application and they help you find a cosigner that fits your situation. They can work because cosigners don’t need to live in your home state to help you get approved for an auto loan. You don’t have to be related to your cosigner – they just need to meet lender requirements.

Websites that offer cosigner-matching services typically require your credit card information, location, and email address, and ask you to explain why you need a cosigner. Expect to pay both the cosigner for putting their good credit on the line and for using the matching service.

Keep in mind that adding a cosigner to your auto loan application doesn't mean guaranteed approval. If you hire a cosigner, it doesn’t mean you have a 100% chance of getting the car loan – just a higher chance.

How Much Does It Cost To Hire A Cosigner?

The overall cost of hiring a cosigner can depend on the size of the auto loan you want and your credit score. If your credit score has serious derogatory marks, it’s probably going to cost you more to hire a cosigner. Some online cosigner-finder sites charge more depending on how fast you need one, and some function like large forums where you talk to potential cosigners and pick the one that's right for you. Other sites have listings of cosigners that fall into specific credit ratings which you can choose from.

As for nailing down a price point for the actual cost of hiring a cosigner, it’s not that easy to figure out. Some sites allow you to barter with the cosigner, some require you to cosign for their loan in exchange for them cosigning yours (cosigner for cosigner). You may even have the ability to offer payment forms outside of cash, but it all depends on what a cosigner wants out of the deal.

An apartment cosigner website states that your rent payment determines your cosigner fee. This means if you're looking for a place that costs around $3,000 a month, the fee for using their service for a cosigner is around $3,000, too. In other words, the price of the cosigner-finding fee is one month's rent. For a car loan, the size of the loan could impact the cosigner fee drastically.

You may also have to enter into several separate contracts, with varying conditions, with a cosigner to seal the deal depending on what you need. For example, a cosigner may not agree to cover your car payments if you’re unable to – they may just agree to help you get approved for the loan. So, while using a cosigner you find online can be good in a pinch, you never quite know what you're going to find.

Risks for You and the Cosigner

Not everyone on the internet is well-meaning. So if you decide to shell out your hard-earned cash and sensitive personal information, be selective about it. Entering a legal contract with a total stranger is risky. Be sure to read the reviews of the cosigner-finder companies as well, and take a look at their Better Business Bureau (BBB) rating.

Most bad credit borrowers ask people who are close to them when they need a cosigner for an auto loan. Cosigning a loan is a big responsibility, and many first-time car buyers ask a parent or a close family member for help in qualifying. Ask someone that you can trust, and make sure that they can trust you as well.

A cosigner that helps you get approved for a car loan is risking their good credit for you. While cosigners don’t get any rights to the vehicle, any reporting on your credit reports is reflected on theirs as well – good or bad.

Because they're taking on a big risk, it’s not cheap to hire a cosigner. Instead of paying for a stranger's help with no guarantee that you’ll get approved for the loan, consider special financing instead. These lenders, called subprime lenders, specialize in helping bad credit borrowers.

What If I Can't Find A Cosigner For A Loan?

If you can't find a cosigner on a car loan it may be time to wait while you build credit. A good way to start is with a secured credit card. This is a credit card where you make a deposit which becomes the card balance, if you pay off what you owe each month, your balance doesn't go down.

Another alternative is to take out a personal loan from a friend or family member who is willing to loan you the money you need for a vehicle. Of course, like any loan, you're still responsible for the payments even if it's not impacting your credit like a traditional loan.

Finally, an alternative to a loan with a cosigner may be to look for a subprime loan with a special finance dealership. The lenders that deal with lower credit scores may have loan options that don't involve having someone else on the loan with you. However, keep in mind that subprime loans typically come with higher interest rates than loans through other lenders.

Vehicle Special Financing

Having bad credit doesn’t always mean you have to hire a cosigner to get into an auto loan. Subprime lenders willing to assist borrowers with poor credit are signed up with special finance dealerships.

They can tell the difference between no credit, situational bad credit, and habitual bad credit, and often work with bankruptcy borrowers as well. This is because they look at the bigger picture – meaning they dive into your overall credit history and financial stability.

Subprime lenders require a down payment, proof of income, ask about your work history, require a list of personal references, and require proof of a permanent address. Because they ask for more information about you, they’re able to look outside of your credit history to determine your creditworthiness. With a subprime auto loan, there’s a good chance you won't need a cosigner, though having one may lower your interest rate options.