Cosigners can be very helpful for borrowers with poor credit that need an auto loan. If you have good credit, and you’re considering cosigning for multiple people, we’ve got some things to think about before going through with it.
Cosigners on Car Loans
When you ask a cosigner to help you get into your next car loan, their good credit score is key in helping you get approved. This is because when you add a cosigner to a loan, they lend you their good score, which lowers the risk auto lenders face, and can help get you approved for a loan.
However, you can only ask one cosigner to sign on a car loan. The same goes for co-borrowers since you can only have two names on a vehicle title. Even though a cosigner isn’t on the title, and doesn't have any rights to the car, lenders still allow just one cosigner on a loan.
If you already asked a cosigner to help you get into your next auto loan with a traditional lender, and you’re still having trouble, it might be time to look into special financing.
Can You Qualify to Cosign Multiple Cars?
Not anyone can cosign for an auto loan. A cosigner typically needs a good credit score and must prove they have enough available income to repay the car loan if the primary borrower can’t.
If you’re thinking about cosigning for multiple car loans, consider these points:
- Once you cosign on a car loan, you’re the backup payer. If the primary borrower starts to fall behind on the payments, or if the vehicle is repossessed, the lender can ask you to pay. Can you afford to repay multiple car loans if the primary borrowers fall behind?
- Any reporting activity from the multiple car loans you cosigned for can impact your credit reports – including missed or late payments.
- Having multiple auto loans on your credit reports can impact your ability to take on new credit yourself. If too much of your income is being tied up by other expenses, or in this case, multiple cosigned car loans, then it could mean being ineligible for future credit.
- You can’t remove yourself from a cosigned car loan as a cosigner without the primary borrower’s permission.
Remember to consider your personal financial situation before agreeing to assist someone else. If you agree to cosign and later find out you're in over your head, it could negatively impact your financial health and hurt your credit score.
That being said, if you have the income and credit score to cosign for multiple car loans and you’re sure of the primary borrowers’ ability to repay the loan successfully, then it could be the right choice for you.
If you cosign for two or more different borrowers and they manage to make all of their auto loan payments on time, it could mean a better credit score for you, too! If the car loans are reported to the major credit bureaus, then timely payments on those loans could improve your credit score over time.
Can I Cosign With Poor Credit?
Typically, a lender prefers a cosigner to have good credit. Borrowers with poor credit scores that are unable to meet credit score requirements of an auto loan may be asked to have a cosigner to provide more security to the loan, since the cosigner agrees to pay for the vehicle if the primary borrower is unable to.
Since the main purpose of a cosigner is to provide security, a cosigner with a lower credit score may not improve the primary borrower’s chances of qualifying for the car loan.
Typically, a good credit score is considered at least 670 or higher. Once you get below 670, you’re likely to be called a subprime or bad credit borrower, and may not be much help as a cosigner.
Can I Have Multiple Cosigners on My Car Loan?
While two may be better than one in a lot of cases, having three different borrowers on one car loan contract is not likely.
As a general rule, lenders only allow up to two people on an auto loan contract. This can mean having one cosigner or one co-borrower.
If you have poor credit and a cosigner wasn’t enough to qualify you for a car loan, then you may need to look toward a special finance dealership that’s equipped to work with tough unique credit situations.
Finding a Special Finance Dealership
Special finance dealerships are signed up with subprime lenders that specialize in assisting borrowers with credit challenges. If your credit score is getting in the way of your next car loan, then complete our free auto loan request form. At Auto Credit Express, we have a nationwide network of dealers, and we’ll look for one in your local area to help get you on the right path to a car loan.
Special Financing for Bad Credit Borrowers
A cosigner can increase your chances of getting approved for a traditional car loan, but it’s never a guarantee. If you still can’t get approved even with a cosigner, a subprime auto loan could work for you.
Subprime lenders work through a dealership’s special finance department, and they look at factors other than just your credit score. Using your income stability, residency stability, a down payment, and more, these bad credit lenders can approve poor credit borrowers using their overall financial wellness – not just their creditworthiness.
If the primary reason you’ve been turned down for financing is because of a poor credit score, you may be able to get subprime financing without the aid of a cosigner. You still need to meet a bad credit lender’s income requirements, but if your credit score is what’s holding you back, subprime financing is worth looking into if you need a vehicle.
