Can a co-signer with bad credit help me get a car loan?
The main purpose of a co-signer is to help you get approval for a car loan by guaranteeing you with the lender in terms of credit. Their good credit rating increases your chances of approval and they promise to pay back the loan if you can’t. However, co-signers have their own requirements that must be met. Let’s go.
Co-signer requirements for an auto loan
Typically, borrowers with a credit score of less than 660 are considered bad credit borrowers. If your co-signer falls below this common benchmark, it may not be of much help in increasing your chances of auto loan approval.
For a co-signer to help you on your next car loan, they usually need to have a good credit score – or at least, better than yours.
The job of a co-signer is also to help secure the loan. They must show the lender that they have been able to manage credit in the past and that they are able to repay the loan if something goes wrong. They are like a back-up payer; called for service if you’re in a traffic jam and can’t pay what you owe.
Who can be a co-signer on a car loan?
Often times, a co-signer is a close family member or friend. However, anyone (other than your spouse) can be a co-signer if they meet the lender’s requirements. This means that your coworker, relative, close friend or even an acquaintance could be your co-signer and help you meet the credit score stipulations of an auto lender.
The hardest part of finding a co-signer, however, is finding one with a good enough credit rating who is willing to risk it for you. Because a co-signer’s credit is in your hands when they take out a loan with you, many people are reluctant to sign this dotted line.
What happens if I miss payments with a co-signer?
If you start to miss payments, the lender can ask the co-signer to take over. Although the co-signer has no rights to the actual vehicle, they have a responsibility to the car loan.
If your co-signer isn’t able to help you with missed payments, the lender usually begins the repossession process. Once a car is repoed, it is usually auctioned with the intention of using the proceeds from the sale to cover the loan balance. If the proceeds of the sale do not cover everything, then you and the co-signer are responsible for this deficit. Plus, repossession is reported on both of your credit reports, which can be devastating to your credit scores.
On the other hand, if the auto loan is declared, which many auto loans are, timely payments can increase your credit rating and that of your co-signer.
If all goes well and you stay up to date on the loan, the co-signer may never need to step in and help you out. This is the ideal scenario: A co-signer helps you get approved and you both see an improvement in your credit score, then the next time you need to get a car loan you might not have to. no need for a co-signer because your credit score has increased.
No luck finding a co-signer?
Having a friend or family member ready to help you on your car buying journey can be a luxury that not everyone has. If you can’t find a co-signer, there are other ways to get a car loan with poor credit.
Special finance dealers are equipped to work with borrowers in many difficult credit situations, such as:
- Bad credit due to past mismanagement
- No credit / borrowers for the first time
- A past vehicle repossession
- Situational bad credit resulting from job loss, divorce, or other life-changing events
These dealers are registered with subprime lenders. Instead of using your credit score as the sole determinant of your auto loan eligibility, subprime lenders look at your big picture. This usually includes examining your income, work history, life stability, and willingness to pay. Many borrowers who work with subprime lenders are not required to have a co-signer if they can meet the requirements on their own.
If you’re ready to hit the road with an auto loan, Express auto loan wants to lend a hand. We’ve built a network of dealers from coast to coast to help borrowers with bad credit. We’ll find a dealer in your area – it’s not a cost, no obligation, and it only takes a few minutes to get started. Fill out our auto loan application form today!