Having a cosigner on an auto loan can help if you're having trouble qualifying due to credit issues. But, having someone cosign doesn’t guarantee an approval – you can still get turned down for a car loan even if you’re applying with help. If you can’t find a cosigner and don't think you can get approved for an auto loan, there are still some other options to look into.
Cosigners and Auto Loan Denial
Cosigners often help bad credit or new borrowers get approved for auto loans because they sign the loan documents with you. The cosigner “lends” you their good credit score, and becomes legally obligated to make payments on the vehicle if you can’t.
However, this is a big favor to ask of someone. If you can’t find anyone that can cosign a car loan with you, you’re not alone. Cosigners take on a lot of risk, and their credit score has to be good to help you get approved for an auto loan. Many people are hesitant to cosign a loan for someone else because their good credit score is at risk, and so is their income, unless you handle the loan responsibly.
However, you’re not out of luck. There are other ways you can increase your chances of getting into a vehicle, even with a credit score that’s the worse for wear.
Here are some alternatives to using a cosigner to consider when you need a car loan:
- Find a subprime lender – If your credit score is what’s stopping you from getting approved for a loan, subprime auto financing could be for you. These lenders operate through a dealership’s special finance department and work with borrowers who have less than stellar credit scores.
- Get a co-borrower – If income is what’s blocking your ability to get approved, consider adding your spouse to the car loan. This would make you both co-borrowers on the loan, and both equally responsible for making the payments. Co-borrowers that are spouses can combine their incomes together, so it could be the boost you need for approval.
- Choose a cheaper vehicle – Some auto lenders may turn you down simply because of the amount you’re looking to finance. Talk to some lenders and ask what amount they’d be willing to finance, then car shop from there.
- Make a large down payment – This is similar to the option above, in that making a large(r) down payment may increase your chances of getting approved for auto financing. There are two reasons for this: you’re financing less, and you’ve shown the lender that you’re willing to invest in the loan. Borrowers who put money down have a lower rate of defaulting on their loans. A sizable down payment looks great to lenders if your credit score and income are what’s making it hard for them to approve you for financing.
Other Ways to Increase Car Loan Approval Odds
If you don’t need a vehicle right away, you should take some time to prepare before you apply for one. Here are some tips to help you:
- Improve your credit score – Working on your credit is easier right now, since the coronavirus pandemic opened up the availability of credit reports. You can request your credit reports for free once a week on www.annualcreditreport.com through April 2021 (after that, it reverts back to once every 12 months). Take advantage of the fact that you can watch your reports nearly in real time, and pay attention to your spending habits to work on your credit.
- Credit report errors getting you down? – Consider paying a credit repair company if your credit reports are riddled with errors, discrepancies, or old accounts and you don’t know where to start. Credit repair companies can help you remove these errors and rebuild your credit score, improving your chances of getting approved by a lender. Check out our trusted partner here if credit repair is what you need.
- Finance at a different kind of dealership – If your credit score is really bad and you’re really in need of a vehicle, consider a buy here pay here (BHPH) dealership. These used car lots offer in-house financing (your dealer is your lender), and they don’t usually check credit reports during the approval process. It might cost you more in interest charges to work with a BHPH dealership, but it could be the break you need if you needed a vehicle yesterday.
- Give yourself some time – Occasionally, auto lenders may not approve you for a loan if you haven’t been at your job for at least a year, or you’ve moved around a lot recently. This is simply because most lenders prefer borrowers who are stable. If you’ve recently gotten a job or just moved, it could be the reason for a denial. Give yourself some time to settle into the change, and then apply at a later date.
Locating the Right Dealership for the Job
Cosigners can be a great way to get into your first car loan, or help you get approved if your credit score isn’t up to snuff, but it can be hard finding one. Hopefully, we’ve helped show you that there are many things you can do to improve your chances of getting approved for an auto loan without a cosigner.
If you’re struggling with credit issues and it's stopping you from getting your next car loan, consider starting with us at Auto Credit Express. We have a nationwide network of dealerships that work with subprime lenders who have the resources to help bad credit borrowers get back on the road.
To get matched to a dealer near you, complete our free auto loan request form. Once you do, we’ll look for a local dealership that can work with unique credit situations.