When you’re getting your very first auto loan, it can be useful to have a cosigner. However, it may not always be necessary depending on the lender you’re financing through. Here’s how cosigners work, how they help, and lenders that may not require you to have one.
First-Time Car Buyer and Cosigners
If you’re putting yourself on the path to your first car loan, it can be a lot to manage. And one of the toughest humps you may have to get over is your credit score.
Many first-time car buyers have less than perfect credit – not because of past missed payments on other loans but simply due to lacking credit history. Borrowers without multiple accounts or years of on-time payments aren’t likely to have a spectacular credit score just yet, because they haven’t proven their ability to repay credit. Without a track record of good loan management, a lender may be hesitant to approve you for vehicle financing.
Since new borrowers tend to have lower credit scores, many auto lenders require them to have a cosigner to qualify for a car loan. A cosigner is someone who signs onto the auto loan with you and lends you their good credit score to help you meet the requirements of the lender. Additionally, the cosigner promises to repay the car loan if you’re unable to. Since there are two people responsible for the loan, there’s less of a chance of things going amiss, so having a cosigner increases your approval odds.
It’s entirely possible that an auto lender is going to require you to have a cosigner for your first car loan if your credit score isn’t up to snuff. However, that doesn’t mean that every lender from here on out is going to have the same requirements or ask you to bring a cosigner.
No Credit? Some Lenders to Consider
Depending on your situation, you may have quite a few options to explore if you don’t have a cosigner.
Lenders that often assist new borrowers generally include:
- Credit unions – Credit unions are often the recommended first stop for a brand new borrower looking for an auto loan. If you’re a member of a credit union and your accounts are in good standing, then they may be willing to work with your thin credit profile. It’s not a guarantee that they can approve you without a good credit score, but these institutions are member-owned and tend to be more lenient on credit score requirements, so it’s worth a shot. Remember that you must meet their other requirements, such as income and work history stipulations, and you may need a down payment.
- Special financing – Special financing is an umbrella term for auto loans for borrowers with bad credit. Subprime lenders signed up with special finance dealerships often have first-time car buyer programs that may not require you to have a cosigner to qualify. These lenders look at more than your credit score, using factors such as your income, employment history, debt to income ratio, living stability, and your down payment amount to qualify you for financing. For borrowers with poor credit that don’t have the help of a cosigner, a subprime lender may be the ticket to a car loan.
While it seems like you only have two main options, credit unions are very plentiful. According to Statista, there were 5,298 different credit unions in the United States in 2020. The catch with these institutions is that you usually need to meet certain criteria to become a member, such as living in the area, holding student status, or being a veteran. Additionally, the longer you’ve been a member of your personal credit union, typically the higher your approval odds are.
Subprime lenders are plentiful, as well. Special finance dealerships are all over the country, but not always as easy to locate. Many dealers don’t advertise their lending partners, but if a subprime lender is what you think your next step is, we want to help.
Finding a Special Finance Dealership
At Auto Credit Express, we’ve cultivated a coast-to-coast network of dealerships that are able to assist borrowers with credit challenges. If you're in need of dealer connections, let us do the hard work of tracking one down for you.
Fill out our free auto loan request form and we’ll look for a dealership in your local area at no cost and with no obligation.