Many bad credit borrowers ask someone to cosign their car loan. We explore what a cosigner does to help increase your chances of approval, and how it works.

Adding a Cosigner to Your Auto Loan

Having a cosigner is a great way to increase your chances of auto loan approval if your credit score is less than perfect. A cosigner lends you their good credit score and can often help you qualify for better loan terms if you're approved.

A cosigner can really be anyone, as long as they have a good credit score and they meet the lender’s income requirements. Typically, borrowers ask friends or family members to cosign a car loan. If you ask a spouse to cosign for you, they become a co-borrower, instead.

A cosigner simply helps the primary borrower get approved for a loan by offering additional security to the lender by promising to make the payments if the primary borrower can’t. They sign the loan contract with you, but don’t get any rights to the vehicle.

While they agree to pay the loan in the event that you’re unable to, they aren’t there to help you make payments each month. You still need to meet the lender’s income requirements, and you can’t add a cosigner’s income to yours to meet the lender’s standards.

Risks for the Cosigner

Before you ask someone to sign an auto loan contract with you, let them know the risks involved. The biggest risk that comes with being a cosigner is the possible negative impact on their good credit score.

If you start to miss payments, it not only harms your credit score but also the cosigner’s. Additionally, the lender can go after the cosigner for payments if you start slipping. If you default, it can remain on your and your cosigner’s credit reports for up to seven years. A default, and the repossession that usually follows, can really hurt your chances of getting approved for new credit in the future, and can drastically lower both of your credit scores.

While missed payments can hurt both your scores, on-time payments can improve them. Since your cosigner risked their good credit to help you get approved for the loan, be sure to stay in contact with them throughout the loan and assure them that their credit is in good hands!

A cosigner also can’t back out of a car loan once the contract is signed. If your credit score has improved since the start of the loan and you want to remove them, you can refinance the auto loan to remove them from the loan. Refinancing is the only way to remove a cosigner.

Finding a Dealership to Work With

Whether or not you find a cosigner, getting a car loan with bad credit can be difficult. Many traditional auto lenders may take one look at your credit score and turn you away – thankfully, there are bad credit car lenders that can help.

Subprime lenders use more than a borrower’s credit score to make their loan decision, and know that people are more than what appears on their credit reports. If you’re struggling to find a lender that’s willing to work within your unique credit situation, start with us at Auto Credit Express.

We match borrowers to dealerships with special finance departments with bad credit auto loan options. With a subprime lender, you may be able to get approved for a car loan without a cosigner if you meet their requirements. To get started, simply complete our free auto loan request form, and we’ll look for a dealer in your area that works with subprime lenders.