If you want a loan to buy yourself a car, but your financial condition is not strong, you would have to look for external support in the form of a co-signer. A co-signer is the person who agrees to pay back a loan on behalf of the primary borrower if the latter misses out on the monthly payments.
Since the co-signing information will be available on both your credit reports, it can become a win-win situation for you and the co-signer, especially if you make the payments on time. However, if you do not make them according to the pre-decided schedule, it can lead to a rift between you and the co-signer. It can affect the close bond that you share with him/her. So, before you ask someone to become a co-signer, make sure you can make the payments efficiently.
Who needs a Co-Signer for buying a Car?
Although a co-signer is not necessary for every auto loan, it increases your approval chances phenomenally, especially in the following situations:
- If you are young and applying for your first car loan.
- If you have a bad credit score and cannot score a loan through banks and traditional lenders.
- If you don't have a stable income source to provide for car maintenance and other expenses.
In such situations, you will need someone who can co-sign your auto loan and simplify the process of buying a car.
Is there an Eligibility Criteria for Co-Signing an Auto Loan?
Co-signing an auto loan requires a relationship of trust between the two individuals, and hence choosing a co-signer from the list of your close friends, relatives, or family members is a good idea. This way, you will have a level of trust and emotional connection with the prospective co-signer. It will enable them to shoulder such a responsibility on your behalf. Now, before starting the search for your co-signer, you need to keep these few things in your mind:
1. Ability to enter a Legal Contract
Your co-signer will also be entering into the auto loan agreement along with you. Hence, the co-signer will have to support you legally and make a legal pledge to pay back the loan if you cannot make timely payments. Make sure that they are of legal age to enter the contract and are willing to sign it.
2. Strong Financials are a Must
Your co-signer should have a secure financial background and a stable source of income to shoulder the financial responsibility of your auto loan. The debt-to-income ratio of a co-signer should also be on the lower side. They should be willing to provide a legal guarantee to pay on your behalf if you cannot do so in the future.
3. An Excellent Credit Score is Necessary
The co-signer should have an excellent credit rating of 750 and above to support your auto loan. A good credit score is necessary as the lender will consider the co-signer’s ratings before approving your loan request. As the co-signer has the responsibility to pay the loan on your behalf, they should not have a bad credit history.
After analyzing all the factors and deciding on whom you want to approach for becoming your co-signer, you need to be very cautious. Co-signing is a big responsibility and involves a high amount of risk. Before asking someone to be your co-signer, you should be ready to openly share your financials with them and not lie to them about anything.
Find a job and look for a stable income source so that you can assure the co-signer of making your monthly payments on time. It would mitigate the risk that they are ready to take on your behalf. Tell them the benefits of co-signing a loan with you. Explain how making your monthly payments on time will not only improve your credit score but would help them to maintain theirs as well.
Show them that you are ready to go the extra mile in making regular payments and explain to them why you need a vehicle. Make them understand that buying a car is not just your desire but a necessity. Inform them how a car will help you in your daily tasks and improve your living standards. Since your potential co-signer is acquainted with you, they will understand that you require emotional and financial support from them.
Although having a co-signer is very important in certain situations, they are not the only person who can help you with auto loan approvals. Even if you cannot find a co-signer, you can still dream of buying a car and go for other options such as a no co-signer auto loan. Search online for auto financing companies that offer auto loan approvals without the need of a co-signer, and you are good to go!
Apply with ezAutoFinance.net to get pre-approved for your next auto loan Whether you have a bad credit score or your credit report mentions a zero credit history, no co-signer auto loans are available to you!
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