When someone asks you to be a cosigner on their car loan, it’s not as simple as signing on the dotted line and forgetting about it. There are many benefits a bad credit buyer gains by having a cosigner, but as a cosigner, there are some drawbacks that you need to be aware of.

What it Means to Be a Cosigner

What to Expect as an Auto Loan CosignerWhen you cosign an auto loan for a friend or family member, you’re agreeing to put your credit on the line so that they can get approved for the vehicle they need.

In order to do this, you have to have good credit and qualify for the loan just like the primary borrower. As a cosigner, anything that happens with the loan – both good and bad – affects your credit just as it does the primary borrower.

It’s not as simple as that, though. When you sign the loan as a cosigner, you’re letting the lender know that they can come to you if the primary borrower can’t make the payments.

This means making any loan payments they miss, or risking the consequences to your credit if you don’t. Be aware that even though you’re signing the loan contract and agreeing to make the payments if necessary, you don’t own the car.

Who Qualifies to Be a Cosigner?

In most cases, someone who needs the help of a cosigner is a bad credit borrower trying to get financed with a subprime lender. This means the qualifications for an auto loan are different than those of a traditional lender. As a cosigner you have to qualify for the loan on your own.

The requirements for qualifying for a bad credit car loan vary by lender. As a cosigner, you have to meet a lender’s income, employment, and residence conditions.

Even if you have excellent credit, you may not be able to help out the primary borrower if you don't meet the lender’s other requirements, such as debt to income.

Pitfalls of Cosigning on a Car Loan

If you and the primary borrower both fail to make the monthly loan payments, repossession is typically inevitable. Having a repo on your credit reports drops your credit score; the better your credit score is to begin with, the further it typically falls. Even though the primary borrower is the one the vehicle was repossessed from, the negative mark still shows up on your credit reports, as well.

As a cosigner it’s important to know you’re still fair game for the lender, even if the car has been repossessed. If the vehicle sells for less than the amount owed, you're also responsible for paying the loan balance if the primary borrower doesn’t or can’t.

Working with the Right People

When you’re asked to be someone’s cosigner, you have the opportunity to help them get the car they need, and might not otherwise be able to get. Cosigning can be a big help to someone, but it can be tricky to navigate if you and the primary borrower aren’t on the same page. Be sure you know what you’re getting into before you sign a loan contract with someone else.

If you’ve been asked to be a cosigner because a friend or family member doesn’t qualify for a loan on their own, it’s important to make sure that they’re applying with the right type of lender for their situation. If they haven’t tried getting a loan from a subprime lender, they may be surprised by what they qualify for.

If you or someone you know has bad credit and needs an auto loan, Auto Credit Express wants to help. We’ve been connecting people with the dealerships that work with the right kind of lenders for bad credit situations for over 20 years.

Let us get you connected to a local dealer! Fill out our easy and free car loan request form to get the process started right now.