Bad credit borrowers applying for a car loan may be asked to bring a cosigner along for the ride. But you may not always need a cosigner if you work with lenders that specialize in assisting with credit challenges.
Is a Cosigner Necessary?
If you work with an auto lender that specializes in bad credit car loans, then you may not need a cosigner at all. Your credit score is only one piece of the puzzle when it comes to subprime financing.
A poor credit score isn’t of that much importance if you can meet the requirements of a subprime lender, such as:
- Be at least 18 years old
- Have a stable work history
- Proof of a working cell phone or landline
- Proof of residency
- Have a valid driver’s license
- Provide around five to eight personal references
- Bring a down payment of $1,000 or 10% of the vehicle’s selling price
- Have a minimum monthly income of $1,500 or $2,500 from a single source
If you can meet these criteria, then you may qualify for a subprime auto loan without the help of a cosigner. If you still want a cosigner to increase your approval odds, just know that cosigners only lend you their good credit score – if you have a lack of income a cosigner can’t help in this situation. A co-borrower may help though since co-borrowers combine income to meet lender requirements.
Bad Credit Auto Loans With a Cosigner
A cosigner may not be right for your situation, or even be of any help, depending on your credit circumstances. Cosigners can help many borrowers with credit challenges get approved for vehicle financing. By lending you their good credit score, they help you meet the credit score requirements of an auto lender.
Your cosigner must also prove that they have enough income to cover your loan payments if you become unable to. They aren’t there to help you make the monthly payments – they’re just a back-up payer. Additionally, both of your credit scores are impacted by all activity on the car loan. If you make your payments on time, it improves their credit; if you miss payments, it lowers their credit.
Cosigners take on a big risk helping someone out, so as a result, they can be hard to come by. Many first-time borrowers or borrowers with tarnished credit are required by traditional auto lenders to have a cosigner to qualify for a car loan. But many people are wary to risk their good credit, and not everyone has enough available income to become a cosigner.
Additionally, a cosigner may not be enough to help borrowers with serious marks on their credit reports. Bankruptcy borrowers, borrowers with a vehicle repossession, or habitual bad credit borrowers, may still not make the cut for vehicle financing even with the assistance of a cosigner. On top of that, having a cosigner isn’t a guarantee that you’re approved for a car loan. If you’re a borrower with credit challenges and you can’t find a cosigner or it isn’t the right solution for you, then it may be time to consider a subprime auto loan.
Finding a Subprime Lender
Subprime lenders are third-party, so you don’t meet with them in person. To get a subprime car loan, you first locate a special finance dealership that’s signed up with these lenders. Most dealerships have lending partners, but special finance dealerships work with bad credit lenders that can specifically help credit-challenged consumers.
You submit all your paperwork to the special finance manager at the dealership, who sends it along to their lending partner(s). If you qualify for financing, you choose a vehicle from the dealer's lot based on what you qualify for.
We want to help you find a special finance dealership. Here at Auto Credit Express, we’ve cultivated a coast-to-coast network of dealers that assist borrowers with credit challenges. Complete our free auto loan request form, and we’ll get right to work looking for a dealership in your local area.