Cosigning No Credit Auto Loans

You need to be aware of your responsibilities before cosigning horrible credit auto loans

Why we know

Before you decide to cosign for any loan, but especially a problem credit auto loan, you should know the issues you could be facing.

We’re aware of these issues since we’ve been a part of bad credit auto sales for close to twenty years here at Auto Credit Express. We even designed a web site so that applicants can learn about repossession and down payments as well as today’s topic, becoming a cosigner for a bad credit auto loan.


Not all applicants with poor credit are able to establish car credit on their own. In some cases another individual with good established credit is needed so they can qualify for a bad credit car loan.

An additional person can be added to the finance contract of a bad credit auto loan typically in one of two ways: as either a co-signer, or as a co-buyer. Although the wording is different, there are similarities between the two:

1.    Both a co-signer and co-buyer are considered co-borrowers and are equally responsible for a loan. If the primary borrower is unable to meet the loan obligations, than both co-signers and co-buyers are required to make the loan payments.

2.    Both types of co-borrowers are signatories on the loan. This means that in addition to the primary borrower, their names appear on the loan contract and both are required to sign the loan documents.

3.    In addition to the primary borrower, both co-signers and co-buyers can be subject to collection action, including wage garnishment, if the loan goes into default.

4.    During the application process, the lender will review the credit reports of both types of co-applicants and take their credit information into consideration.


While the credit backgrounds of both types of co-applicants are considered, lenders view their incomes differently. In fact, lenders classify the co-borrower as either a co-signer or a co-buyer depending upon how their income relates to that of the primary borrower.

Co-buyer – This person’s income can be added to (co-mingled with) an applicant’s income in order to meet the lender’s income requirements. The combined income of both is then used to qualify for a loan. In most instances, this means that the co-buyer is either the husband or wife of an applicant.

Co-signer – While the credit background of this individual is considered in meeting the lender’s credit requirements, this person’s income will not be added to that of the borrower’s in order to meet the minimum income requirements. This means that the income of the primary borrower as well as that of the co-signer have to qualify, individually, for the lender’s income requirements.

Other qualifications

Typically, it’s easier for someone to qualify as either type of co-applicant if they are related to the primary borrower. In most cases, wives and husbands are usually recognized and treated by lenders as co-buyers on a loan. Fathers, mothers, sisters, brothers, grandmothers, grandfathers as well as sons and daughters who are co-applicants are usually considered to be co-signers, since their incomes usually cannot be co-mingled with that of the primary borrower.

As we see it

Before co-signing for a problem credit auto loan, be sure you know exactly what you’re agreeing to – which includes potentially you making loan payments if the primary borrower does not.

At Auto Credit Express we help people with bad car credit find a dealer that can give them their best chance at an approval for a bad credit car.

So if you’re serious about getting your auto credit back on track, you can begin now by filling out our online car loans bad credit application.

Posted on December 8, 2011 by in Auto Loans, Bad Credit, Lender Companies
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