You most certainly can cosign on another car loan if you have one already. In fact, cosigning for someone can help improve your credit score since their auto loan shows up on your credit reports. However, being a cosigner can also result in negative consequences, so you and the primary borrower have to stay in communication.
Cosigner’s Role on an Auto Loan
In order to be a cosigner, you must meet the lender’s requirements, These typically include having a good credit score (usually 660 and above) and enough available income to afford the loan. The lender shouldn't have an issue with you being a cosigner if you meet these requirements.
Once you sign the loan documents, your name is added to the loan and it gets listed on your credit reports. As a cosigner, you don’t own the vehicle, but you’re still responsible if the primary borrower fails to make a payment.
In other words, if the primary borrower misses a payment or defaults, the lender is going to come after you for them. If neither you nor the primary borrower pays, then repossession becomes a real threat. This can massively drop both of your credit scores and it ends up on your credit reports for up to seven years.
If you’re not careful, your good credit can instantly drop because of the primary borrower’s negative actions. Make sure you sit down and discuss any backup plans in the even they can’t make a payment. The last thing you, the primary borrower, and the lender want is for the car to be repossessed.
How to Remove a Cosigner from a Car Loan
Another thing you need to be aware of before you sign anything is how to remove, or even add, someone to an auto loan. The only way to do either of these things to an existing loan is to refinance it.
If the primary borrower wants to remove you as a cosigner, their credit score needs to have improved, and at least a year needs to have passed since they took out the loan. Lenders like to see that the primary borrower has taken the right steps toward building their credit before approving them for refinancing.
If they qualify, they can move forward and remove you from the loan. If they don't, but still feel adamant about removing you as a cosigner, the only way they can do this is by having you refinance the loan in your name and signing over the title to you. However, this defeats the purpose since they would no longer legally own the vehicle at this point.
The Bottom Line
If you’ve been asked to be a cosigner, you should know that there are consequences that could arise if you and the primary borrower don’t keep each other updated. On the flip side, you could also see some benefits, such as having an additional line of positive credit added to your credit mix.
If you’re not cosigner material, but have one on hand and are ready to get a car loan, we want to help. At Auto Credit Express, we work with a nationwide network of special finance dealerships that have the lending resources to assist people with bad credit.
To get started, simply fill out our free and fast auto loan request form, and we’ll get right to work matching you with a local dealer!