If you’ve been denied financing for a vehicle because you have no credit or bad credit,* then an auto loan cosigner or a co-borrower may be what’s needed to get on the road and on with your life.
While a cosigner and co-borrower are different, each may boost your chances of approval and, if approved, better your loan terms.
And what a difference having your own transportation can make, whether it’s getting to college classes to further your education, getting to work on time and stress free, picking up the kids from school or taking a relaxing road trip wherever you choose.
Do I need a cosigner or co-borrower on a car loan?
A cosigner may help by guaranteeing to repay the loan should you fail to do so, which provides a safety net for both you and the lender. “Having a cosigner on your loan gives your lender additional assurance that the loan will be repaid,” says the Consumer Financial Protection Bureau (CFPB).
Adding a co-borrower (also known as a co-applicant) to your application, on the other hand, means you’re applying for a joint auto loan. If approved, each borrower is responsible for repaying the loan and has the same rights to the use and ownership of the vehicle.
Here are some situations in which another signature on the application may help:
No credit history – If you’re a student or a young first-time car buyer, you may have no work history, never applied for a credit card or loan, and so have no credit experience. If you then ran into a flat “no” when applying for a car loan, a cosigner or co-borrower means the lender might take a second look at approving your loan.
Poor credit – Alternatively, you might have a credit history but, unfortunately, it’s bad. The result might be a declined application here, too. But again, applying with an auto loan cosigner, or pairing up with a co-borrower, may mean a lender gives you the green light.
Auto loan cosigner and co-borrower requirements
Who should you ask, and what are their responsibilities?
Often, a cosigner will be a family member, such as a parent, or a spouse or close friend, says the CFPB.
There are certain requirements they should typically meet, and of key importance is that they’re creditworthy. A lender will rely on the cosigner’s credit history and score when making a loan decision, advises the bureau, and if your own credit history is limited, “a cosigner with good or excellent credit could significantly lower your interest rate.”
Cosigning for a car loan comes with risks to be aware of, as well. The cosigner is obliged to meet any missed payments and even pay the full loan amount if the borrower doesn’t pay.
In addition, the cosigner’s credit, as well as that of the borrower, may be harmed if the borrower is late with payments or defaults on the loan. The obligation to guarantee someone else’s loan may also affect the cosigner’s own ability to get loans.
When applying for financing with a co-borrower, it also helps if they have a good credit history, especially if your own is poor. In other situations, such as with couples, it may just make most sense to apply for a joint auto loan.
Applying for a car loan with RoadLoans
Online lender RoadLoans accepts applications from people with all types of credit, including those with no credit and bad credit histories. You can apply as an individual or, if you’re planning to own a vehicle with someone else, with a co-borrower. You’ll notice the option to add a co-applicant at the end of our simple, one-page application.
To learn more about auto financing with RoadLoans, the direct-lending platform of Santander Consumer USA, read about our streamlined process.
Apply for a car loan online.
* “Bad” or “Poor” credit generally is considered a FICO score around 600 and below by sources including the Consumer Federation of America and National Credit Reporting Association (reported by the Associated Press), Bankrate.com, Credit.com, Investopedia, NerdWallet.com and others. The Congressional Budget Office identifies a FICO score of 620 as the “cutoff” for prime loans. FICO scores are not the sole factor in lending decisions by RoadLoans.com and Santander Consumer USA.