Buying a car with bad credit or no credit can be a frustrating experience. In either case, lenders may turn down your loan application. Is there a way around this? Yes, one way is by adding a cosigner to the loan agreement.
A cosigner on your auto financing will give the lender assurance that the loan will be paid in the event that you stop making the payments. In order for someone to qualify as a cosigner, they must have a good to excellent credit history as well as the income to afford the payments in the event you, the borrower, default on the loan.
Who should you ask? Well, typically, a family member, spouse or close friend are the ones that you would look to when considering a cosigner for a loan.
Benefits and Responsibilities of a Cosigner
You can gain a lot by having someone cosign your loan, like being able to get approved for the car that will get you where you need to go. But, being a cosigner entails a sizable commitment.
A cosigner should be aware of the responsibility.
Since they are assuming responsibility for the payments alongside you, the cosigner should understand that there is a possibility they may have to make payments on the loan, even though they have no claim to the vehicle itself. In addition to that, the loan will appear as part of their credit as well, and will affect their Debt-to-Income ratio (DTI). This could hinder their ability to get approved for loans in the future. Also, if you fail to make the payments or are late on them, this will negatively affect the cosigner's credit score.
Another thing that a cosigner should be aware of is that they will not be able to be removed from the loan contract unless you, the primary borrower, are able to refinance the loan as the sole applicant.
When you ask someone to cosign for you, be sure to explain all of the risks. Furthermore, do everything you possibly can to ensure that they will never have to make a single payment on your loan. After all, they're doing you a huge favor by helping you get approved for the vehicle you need so much.
Get the Help You Deserve
At Auto Credit Express, we believe that everyone deserves the chance to get approved for auto financing, whether they have a cosigner or not. Our nationwide network of car dealers is qualified to help those with bad credit or no credit get back on the road fast. Just complete the secure and fast online application today and we will connect you with the closest area dealer that is best suited to help you. Start today, and drive tomorrow.