A cosigner is someone that helps you get approved for an auto loan by lending you their good (or better than yours) credit score. However, their role in your car loan beyond that isn't to help you with payments. Here’s what you need to know.
Cosigners and Auto Loan Responsibility
Unfortunately, a cosigner isn’t there to help you make the car payments each month. They’re considered a last-resort payer.
A cosigner’s main purpose is to increase your chances of getting approved for the car loan by agreeing to pay for the loan if you become unable to. Cosigners also must meet income requirements proving that they have the ability to help with the car loan if you can’t pay.
If you’re unable to manage the loan and you start heading toward default and subsequent repossession, the lender is likely to contact your cosigner and ask them to make payments to catch up – but they’re not going to supplement your monthly payments. As the primary borrower, your auto loan balance is solely your responsibility.
My Cosigner Can’t Help at All
If you’re heading down the path of default and need your cosigner’s help, it’s time to have a talk with them.
When a cosigner signs onto an auto loan with you, their credit score is impacted by the activity of the loan. This means your timely, missed, or late payments all impact both of your credit scores. And, if you default on the loan and the vehicle is repossessed, it hurts both of your credit ratings, as well. Remind the cosigner of their responsibility to help with the car loan if you become unable to, and the possible negative consequences of default which can (and will) impact both of you.
If they refuse to help or aren't in a position to, the next step is to talk to your lender. If you’re going through financial hardships currently, you may have the option to defer your payments temporarily. A deferment is where the lender pauses payments giving you the cushion you need to reorganize your finances and resume the loan successfully.
Many lenders require a hardship letter where you make your case as to why you need a deferment. Situations like sudden job loss, medical emergency, or other unexpected events are usually acceptable reasons to defer payments. Act quickly if you're about to miss a payment – most auto lenders don’t approve deferment plans for borrowers that are already behind.
Deferred payments aren’t wiped away – just pushed back to a later date. While it slightly increases your auto loan term, it could be the break you need to avoid default. Typically, most deferments can last for around three months.
Need Another Option?
If your cosigner can’t or won’t help you repay the loan and you don't qualify for deferment, another option to consider is selling the vehicle and getting something else.
You don’t need a cosigner’s permission to sell the car at all. Their name is never listed on the title, so they have no rights or say in what you choose to do with it. If you want to sell it, the cosigner doesn’t need to be present for the sale, and they can’t take possession of the vehicle if you default.
Here’s a common problem for borrowers though: borrowers with cosigners on their current loan typically have credit issues. A cosigner’s purpose is to help a bad credit borrower get approved for a loan. So if you sell your current car that has a cosigned auto loan, you may struggle to get approved for another auto loan without a cosigner. But there’s still another option to consider – subprime lenders.
Subprime lenders are signed up with special finance dealerships. They specialize in assisting borrowers with tough credit challenges. Since bad credit is their game, you may not need a cosigner to qualify for a subprime car loan because they consider more than just your credit score to determine your auto loan eligibility.
We’re Here to Help
At Auto Credit Express, we aim to help borrowers find dealerships that can help with bad credit. Thanks to our nationwide network of dealers that are signed up subprime lenders, we’ve been helping consumers for over 20 years get the vehicle financing they need.
To get matched to a dealership in your local area that has bad credit lending resources, fill out our free auto loan request form. It’s secure, only takes a few minutes, and there’s never an obligation. Get started today!