If you have financed a car with bad credit, your interest rate may be higher than you would like it to be. So, you may be thinking of refinancing in order to lower that rate and reduce your negative equity risk, but your credit score is still relatively low. Will getting a cosigner on board improve your chances to be refinanced? Yes. But make sure that your cosigner is qualified, and that he or she knows the risks that are involved.
Who Can Cosign?
Your cosigner doesn't have to be a family member, but it should be someone with whom you have a reasonably close relationship because this individual will be making a big commitment on your behalf.
- Credit Worthiness: The person whom you ask to cosign for you should have good or excellent credit (a FICO score of 700+). Essentially, you will be using their high score to compensate for your low one, so they need to have a solid repayment history.
- Sufficient Funds: Your cosigner will need to provide proof that they will be able to make the loan payments if you default. This means that they may need to have documents (pay stubs and/or tax records) that show evidence of a regular income that is high enough to meet the financial demands of the loan agreement. They will also need to prove that their own recurring debt (monthly bills) won't compromise their ability to pay for this potential burden.
Respecting Better Rates on Your Refinanced Auto Loan
If a cosigner makes it possible for you to refinance your high interest auto loan, you could save a substantial amount of money on your car purchase. Just remember that this person's credit health will now be in your hands, so you have to exercise responsibility in the arrangement.
- Be mindful of your actions. Don't be late with your payments or miss a payment. Negative actions will have an equal impact on you and your cosigner.
- Keep communication open. If there is even a chance that you will have trouble making a payment, let your cosigner know so that the two of you can figure out a solution as a team.
- Be appreciative. Always remember that the person who has agreed to cosign for you has done you a huge favor. So, if they ever need something - to borrow the car, perhaps - don’t hesitate to reciprocate.
Taking the Leap
Whether you're in the market to get a new auto loan or to refinance an existing one, Auto Credit Express can help you no matter what your credit situation looks like. We'll make sure that you get the best deal possible on your financing, and our process is simple.
Just fill out our fast and secure application to get started today.