A cosigner can help you get approved for your next car loan, but not in every situation.
Cosigners Can Help in Many Situations
Cosigners sign onto the loan contract with you and carry some responsibility for the car loan. They promise to help pay for the loan if you, the primary borrower, can’t. They "lend" you their good credit score and may help you get into an auto loan easier than if you were to apply alone.
In a nutshell, a cosigner backs you up and vouches for you, and this helps you get approved for vehicle financing.
Many borrowers enlist the help of a cosigner, but they’re not a one-size-fits-all solution. Here are a few scenarios where a cosigner could help you get into your next car loan:
- You have bad credit – Bad credit can make it tough to get an auto loan, since some traditional lenders may consider a low credit score risky. A cosigner with a long-standing, good credit history lowers your risk as a borrower, making it more likely to land that approval.
- You have no credit history – Borrowers with limited or little credit history who haven’t proven (on paper) they’re able to handle credit may be asked to have a cosigner. Cosigners promise to repay the auto loan if you’re unable to, so there’s less risk for the lender. Many first-time car buyers or younger borrowers ask a parent or family member to be a cosigner so they can get into their first car loan, but a cosigner can be anyone that’s not your spouse.
- You want a lower interest rate – Your credit score is the biggest predictor of your interest rate on a car loan. If your credit score isn’t yielding the interest rates you prefer, then a cosigner’s good credit score could help you qualify for a lower one.
- Your credit doesn’t make the cut – Even if your credit isn’t considered “bad,” some auto lenders have high credit score requirements. If you’re looking for a specific auto loan deal and your credit score isn’t quite there, then a cosigner could be the answer.
Cosigners can be very useful for borrowers with credit challenges. If your reason for wanting a cosigner isn’t listed above, you may need another solution.
When a Cosigner Can’t Help
There are some situations where a cosigner isn’t the right fit – they can’t help every borrower get approved for a car loan in every scenario. Here are some examples of when a cosigner doesn’t make sense:
- Your income doesn’t meet requirements – Cosigners can’t add their income to yours to help you meet income requirements. Their income is considered separate from yours, and they need to meet their own income requirements, just as you do, in order to qualify as a cosigner.
- Can’t meet the down payment requirement – Auto lenders almost always require that a down payment isn’t borrowed money. If you’re considering a cosigner because you want them to help with the down payment requirement, but they’re loaning you the money to do so, it might not work in your favor. In most cases, down payments must come from your own pocket or trade-in equity.
- Your credit reports have too many bad marks – While cosigners can assist borrowers with credit issues, serious red marks can be hard to leap over. Things like a dismissed bankruptcy or a recent vehicle repossession usually make your chances of getting approved slim, and sometimes cosigners can't help in these situations.
If a cosigner isn’t the right choice for your circumstances, then subprime financing may be what you need to get a vehicle.
Subprime Auto Financing
Subprime auto lenders are signed up with special finance dealerships, third-party style. They work remotely through certain dealerships and assist borrowers in many different situations. For bad credit borrowers without a cosigner or those with tarnished credit reports where a cosigner can’t help, subprime financing could be your solution.
These lenders take a closer look at your financial situation alongside your credit history. Subprime lenders examine your employment history, debt to income ratio, down payment amount, living expenses and situation, and more. If you meet the base requirements of a subprime lender, you may not need a cosigner at all to get into an auto loan.
The tricky part of getting a subprime car loan is often finding a dealer that’s signed up with them – but we can help with that.
Let Us Do the Legwork
Here at Auto Credit Express, we connect bad credit borrowers to dealerships that are equipped with subprime lenders. Skip the search for a special finance dealership by filling out our free auto loan request form – we’ll do the searching for you at no cost and no obligation so you can get into the vehicle you need.