Cosigners Cobuyers and Bad Credit Car Loans

Although both are equally responsible in a bad credit car loan most lenders attach a different meaning to each of these terms.

Know the difference

At Auto Credit Express we’ve spent the last twenty years helping consumers with bad credit raise their credit scores and reestablish their car credit by financing a new or recent pre-owned vehicle with a bad credit car loan. During that time, we’ve tried to educate consumers on the loan process, since these very same people begin with a distinct disadvantage due to the high interest rates charged for these loans.

One aspect of any loan process is the possibility of needing an additional person on the finance contract in order to qualify for the loan. But there are two different ways to approach this and if the banks know the difference, you should, too.

Co-signer or co-buyer

When it comes to bad credit auto loans, there are two ways of adding a person to the finance contract. An individual can be added as a co-signer, or someone can be added as a co-buyer. Although the titles are different, there are a number of things that are similar when it comes to co-signers and co-borrowers:

1. Both are co-applicants and, as such, are also responsible for the loan. If the primary borrower is unable to meet the loan obligations, than the co-signer or co-borrower must make payments on the loan.

2. Both the co-signer and co-borrower are signatories on the loan. This means that in addition to the primary borrower, the co-signer and co-borrower both appear on the loan and sign the loan agreement documents.

3. In the event the loan goes into default, both a co-borrower and co-signer can be subject to collection action that includes garnishment.

4. During the loan application process, the lender will review the credit reports of both the co-borrower and the co-signer and take the credit history(s) into consideration during the approval process.

Income mingling

While the credit histories of both types of co-applicants will be taken into consideration, lenders treat the incomes of each type of co-applicant differently. In fact, the bank will classify co-applicants as a co-signer or co-borrower depending on how their income relates to the primary borrower.

Co-signer – This individual’s income can be added to (commingled with) the applicants income in order to meet the income requirements of the loan. The total income of both individuals is used to qualify for the loan. In most instances, this would mean that the co-signer is the husband or wife of the applicant.

Co-borrower – While the credit score of this individual will be considered in meeting the credit history requirements of the loan, their income, by itself, will not be considered in order to meet the income requirements of the loan. Both the primary borrower and the co-borrower have to individually qualify for the income requirements of the loan.

The Bottom Line

Now you know the rest of the story as it pertains to co-applicants. As for us at Auto Credit Express, you should know that since our inception we have processed over 1,000,000 online applications and closed over 1 billion dollars in bad credit auto loans. Our nationwide network of dealers work with a broad spectrum of lenders to get you approved. Once you’re approved, each month you make a timely car payment you will improve your FICO score and reestablish your financial future.

Isn’t it time you visited to see what we can do for you?

Posted on October 16, 2009 by in New Cars
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