A cosigner’s primary purpose is to help you get approved for an auto loan by vouching for you to the lender credit-wise. Their good credit score increases your approval odds, and they promise to repay the loan in the event you’re unable to. Cosigners have their own requirements that need to be met, though. Let’s get into it.
Cosigner Requirements for an Auto Loan
As a general rule of thumb, borrowers with a credit score below 660 are considered bad credit borrowers. If your cosigner falls below that common benchmark, they may not be too much help in boosting your car loan approval odds.
For a cosigner to be of any help on your next car loan, they typically need to have a credit score that’s in good shape – or at the very least, better than yours.
A cosigner’s job is also to help secure the loan. They must show the lender they have been able to manage credit in the past, and that they’re able to repay the loan if something goes wrong. They’re like a backup payer; called into duty if you’re in a jam and can’t pay what you owe.
Who Can Be a Cosigner on a Car Loan?
Often, a cosigner is a close family member or friend. However, anyone (that isn’t your spouse) can be a cosigner if they meet the lender’s requirements. This means your co-worker, parent, close friend, or even an acquaintance could be your cosigner and help you meet the credit score stipulations of an auto lender.
The tough part of getting a cosigner, though, is finding one with a good enough credit score who’s willing to risk it for you. Because a cosigner's credit is in your hands when they take on a loan with you, many people are hesitant to sign that dotted line.
What Happens if I Miss Payments With a Cosigner?
If you do start to miss payments, the lender can ask the cosigner to pick up the slack. While the cosigner doesn’t have any rights to the actual vehicle, they do have a responsibility to the auto loan.
If your cosigner is unable to help in the event of missed payments, then the lender usually starts the repossession process. Once a car is repo’d, it’s usually put up for auction with the intention of using the sale proceeds to cover the remaining loan balance. If the sale proceeds don’t cover everything, then you and the cosigner are responsible for that deficiency balance. Additionally, the repossession is reported on both of your credit reports, which can be devastating to your credit scores.
On the other hand, if the auto loan is reported, which many car loans are, then the timely payments can boost both your and your cosigner’s credit scores.
If all goes well and you stay current on the loan, the cosigner may never need to step up and help. This is the ideal scenario: cosigner helps you get approved and you both see improvements in your credit score, then next time you need to get a car loan you may not need a cosigner because your credit score increased.
No Luck Finding a Cosigner?
Having a friend or family member willing to help you on your car buying journey can be a luxury that not everyone has. If you can’t find a cosigner, there are other ways to get an auto loan with poor credit.
Special finance dealerships are equipped to work with borrowers in many tough credit situations, such as:
- Bad credit from past poor management
- No credit/first-time borrowers
- A past vehicle repossession
- Situational bad credit from job loss, divorce, or other life-alternating events
These dealers are signed up with subprime lenders. Instead of using your credit score as the sole determinant of your auto loan eligibility, subprime lenders look at your situation as a whole. This typically includes examining your income, work history, living stability, and willingness to pay. Many borrowers that work with subprime lenders aren’t required to have a cosigner if they can meet the requirements on their own.
If you’re ready to get on the road with an auto loan, Auto Credit Express wants to lend a helping hand. We’ve constructed a coast-to-coast network of dealerships able to assist bad credit borrowers. We’ll look for a dealer in your local area – it's no cost, carries no obligation, and it only takes a few minutes to get started. Complete our auto loan request form today!