As long as you meet the requirements, you can certainly cosign a car loan for your boyfriend or girlfriend. However, you can’t just walk away from the loan if you and your significant other break up, so it’s important that you understand what it means to be a cosigner and what your rights are before you agree to sign the loan documents.
Cosigner Basics and Rights
In order to be a cosigner, you need to meet the lender’s basic cosigner requirements. These include having good credit (usually in the 700s) and enough disposable income to make payments if the primary borrower can't. As a cosigner, your role is to help the primary borrower get approved for financing by letting them “borrow” your good credit.
Although your name appears on the loan and the loan shows up on your credit reports, you don’t have any ownership rights to the vehicle. You can't co-own the car with your significant other as a cosigner, and your name isn’t listed on the title.
This is where things could get tricky: even though you don't own the vehicle, if the primary borrower misses a payment, the lender can come after you for the money. If neither of you pay and the loan defaults, then you and the primary borrower run the risk of repossession and taking a big hit to both your credit scores.
Because you’re the cosigner and you have the better credit, any delinquencies that occur during the loan term affect your credit score the most. You could have a near-perfect credit score, and then have it drop around 100 points because of a missed payment on the auto loan you cosigned. On the flip side, as long as you and the primary borrower stay on top of the monthly payments, you should see your credit score get even better over time.
Removing a Cosigner from an Auto Loan
What happens if you and your girlfriend or boyfriend break up and you don’t want to be on the car loan anymore? An auto loan is a legally binding contract, so you can’t just walk away from it. Instead, to remove a cosigner from a car loan, the primary borrower needs to refinance the auto loan if they plan on keeping the vehicle and want to remove you from the loan.
To do this, the primary borrower needs to qualify for refinancing on his or her own. Lenders have specific refinancing requirements such as an improved credit score, around at least a year of timely payments, and a car that meets their age and mileage rules.
If the primary borrower isn’t able to refinance the loan and you want out, then you need to refinance the loan yourself and have the title transferred to you. Otherwise, you’re stuck with the loan until it’s paid off.
The Bottom Line
Being a cosigner for someone you care about comes with a lot of responsibility and potential risk. It’s important to discuss your role as a cosigner with your girlfriend or boyfriend, and have a plan of action in the event you two do break up.
If you, or someone you know, needs help finding a dealership that handles bad credit auto loans, we can help. At Auto Credit Express, we aren’t lenders, but we work with a nationwide network of dealers that know bad credit. All you have to do to get started is fill out our free and easy car loan request form, and we’ll get right to work connecting you to a dealership near you!