If your credit score is below 660 or you want a chance for a lower interest rate, then bringing a cosigner along could give you an edge. Here’s how cosigners can help, what their rights are, and some other auto lending options to consider if you have poor credit.
Find a Qualifying Cosigner
Pretty much anyone can be your cosigner for a car loan. Your cousin, friend, co-worker, roommate, parent – your relationship to the person doesn’t matter. The only person that lenders don’t accept as a cosigner is your spouse.
For your cosigner to qualify, they typically must:
- Have a good credit score, usually 660 or higher
- Meet income requirements
- Meet debt to income requirements
For your cosigner to be of any help in your pursuit for an auto loan, they must have a decent credit score, enough income to repay the loan if required
and have enough room in their budget to do so.
Once you find a cosigner with a good credit score and enough available income, you can take them with you to apply for an auto loan! Both of your credit reports are pulled, you both need documents to prove you’re able to repay the loan (such as check stubs), and proof of a working phone, proof of residency, and driver’s license.
Understand Your Rights as Primary Borrower
If you find a cosigner and you’re able to qualify for an auto loan, then it’s important to know and understand your rights and responsibilities, and inform the cosigner of theirs.
Cosigners add security to the auto loan, since they agree to repay the loan if you become unable to. Lenders can be wary of approving borrowers with a low credit score or tarnished credit history. A cosigner can increase your approval odds because they act as a backup payer.
While you have a backup payer on the car loan, you’re the primary borrower. This means that you have full rights to the vehicle and it’s your responsibility to make the car payments each month. Your cosigner isn’t there to help you make the monthly payments – they’re the last resort. If you head down the path of default, or lose your income and can’t make payments, that’s when the cosigner is called into action in most cases.
Since you’re the primary borrower, you get the last say in what happens to the vehicle and its loan. Your cosigner can’t take your car, sell it, or end the loan because they have no authority to do so. You can end the loan contract by paying off the lender without having to consult the cosigner or asking their permission (although it may be polite to let them know if you do!).
Understand the Credit Score Impact
Both you and the cosigner are impacted by the payment history on the auto loan. If you make all the payments on time, then both of your credit scores can see improvement during the life of the loan. However, the opposite is true as well. If you miss a few payments, or are consistently late, both of your credit scores could see a decline.
Finding a Bad Credit Auto Lender
Even if you do have a cosigner to lend you their good credit score, some lenders may still be wary if your credit history is tarnished.
Credit unions and subprime lenders tend to be the most willing when it comes to lending to credit-challenged consumers. Credit unions are member-owned, and may be willing to work with less than perfect credit if you’ve been a long-standing member and maintained a good account history with them. However, borrowers with serious credit challenges such as bankruptcy, repossession, or multiple negative marks may need to seek out subprime financing.
Subprime lenders are signed up with special finance dealerships. They often assist borrowers in tough credit situations, and may not even require you to have a cosigner if they can meet the requirements alone. Bad credit isn’t a stranger to these lenders, and not everyone has the luxury of a cosigner, so subprime auto loans are a great option for bad credit borrowers in need of vehicle financing.
Cosigner or not, we want to help you find the car buying resources you’re looking for. Here at Auto Credit Express, we’ve created a nationwide network of special finance dealerships that are equipped to handle many unique credit situations. Once you complete our free auto loan request form, we’ll look for a dealer in your local area. Get started now!
