If you have bad credit and need to buy a car, getting a cosigner on board can greatly improve your chances for auto loan approval. Just make sure that your potential cosigner is well informed about the responsibility involved and that they will be able to meet all of the necessary requirements.
What it Takes to be a Loan Cosigner
A loan cosigner agrees to assume full responsibility for the loan if the primary applicant stops making payments. A viable candidate for cosigning would be either a family member or a very close friend because so much is at stake financially. Also, not everyone is qualified to be a cosigner.
- A cosigner must be willing to commit to the role. Some potential cosigners may feel uncomfortable with signing a contract, so it is a good idea to let them know ahead of time that this will be expected.
- A cosigner must have good or excellent credit. You will essentially be “borrowing” your friend or family member’s excellent credit score in order to gain financing approval. And most lenders will require the cosigner’s FICO rating to be at least 700.
- A cosigner may have to provide proof of income. Most lenders will want to be assured that your cosigner is not only willing to pay should you default, but will actually be able to pay. It will be a good idea for your cosigning candidate to provide copies of recent paycheck stubs.
- A cosigner should not have a substantial amount of existing debt. Even if your cosigner has great credit and a qualifying income, your application may be denied if they are already under several financial obligations. Your loan will be included in their debt to income (DTI) ratio, and if this will mean that too much of their income will be promised to payments, they will not be allowed to cosign.
If your cosigner meets all of the expected requirements, you can confidently proceed with your loan application. Just make sure that you are fully committed to being responsible with your end of the agreement. Someone whom you presumably care about has agreed to put a great deal of trust in you, so the last thing that you want to do is let that person down.
It may be wise to treat the loan as a team project. There is a good chance that the person who is cosigning is someone who has some experience with budgets and financing agreements. You’ve already taken the plunge and asked them to help you buy a vehicle, so don’t be afraid to ask your cosigner for advice on how to save money or improve your credit.
Another Team Player
Whether you have a cosigner or not, if you need to buy a car with bad credit, you should strongly consider getting SLG Progressive + Commercial Insurance Agency on your side. For absolutely no charge, we will connect you with a dealer near you who is qualified to work with your credit situation. Our process is fast and easy, and it will take very little of your time to fill out our simple and secure online application. Don’t wait another day to get back on the road and on track towards better credit.