You may have heard people use the phrases “cosign for a car” or “auto loan cosigner,” and wondered what they mean and how cosigning a car loan works. Show
A co-signer is another person who also accepts full responsibility to pay back a loan. The co-signer is obligated to pay any missed payments and even the full amount of the loan, if the primary borrower doesn’t pay. Having a co-signer on your loan gives the lender additional assurance that the loan will be repaid. For people with no credit history or bad credit, having a co-signer makes it easier to get a car loan. For example, young adults who don’t have an established credit history can get a car loan to buy their first car, by having a parent as a co-signer on the loan. If the parent has good credit, the loan is even more likely to be approved. While the primary borrower is responsible for making loan payments, the loan debt will appear in both the primary and co-signer’s credit history. The co-signer should be fully aware that, because the debt is in their name too, they are responsible for paying the monthly loan payments or repaying the entire loan balance, should the primary signer default. Credit Union of Southern California (CU SoCal) is one of the fastest growing credit unions in Southern California, providing checking, savings, and loan products with quick pre-approvals, no application or funding fees, and other great Member benefits. Call CU SoCal at 866.287.6225 to schedule a free no-obligation loan consultation, or apply for membership online today! Buying a car with a co-signer can make it easier and cheaper to buy a car, but how does the process work? CU SoCal explains what you need to know about having someone co-sign your loan and being a co-signer yourself. What it Means to Be a Co-Signer on a Car LoanThe auto loan co-signer equally accepts the loan debt responsibility along with the primary borrower, the person who will own and drive the car.Three things every co-signer should know:
How Does Co-Signing a Car Loan Affect Your Credit?Co-signing a loan can help or hurt your credit scores. Having a co-signer on the loan will help the primary borrower build their credit score (as long as they continue to make on-time payments). It could also help the co-signer build their credit score and credit history, if the primary borrower makes on-time payments throughout the course of the loan. Late or missed payments on a loan will damage the credit of both the signer and co-signer.How Much Does a Co-signer Help on Auto Loans?Co-signing a car loan makes buying a car easier and more affordable for the primary borrower. According to the credit bureau Equifax, having a co-signer with good credit scores will make the interest rate and other terms more affordable. This is because having a co-signer reduces the amount of risk the lender is taking by providing the loan. Less risk for the lender equals more reward for the car buyer – in the form of a lower interest rate, for example.Before Co-Signing on a Car LoanIf someone asks you to be their co-signer on a car loan, consider whether this will be a safe financial move for you. Here are some important questions all co-signers should consider before they sign the loan agreement:
Auto Loan Co-signer RequirementsThe requirements for co-signing an auto loan are the same as those required for any car loan application:
Should You Be a Co-signer?There are pros and cons to being a co-signer on a car loan. Carefully consider each and determine which is best for your unique situation.Pros:
Cons:If the primary signer stops paying the loan, misses payments or makes late payments, the co-signer is responsible for the loan payment. The credit bureau, Equifax, offers these cautions regarding cosigning a loan:
Important Note from Consumerfinance.gov: Co-signing a loan may also affect your ability to obtain loans for yourself because you have taken on the obligation to pay the loan. Lenders ask for a co-signer when they do not want to take on the full risk of loaning money to a particular primary borrower. Read the terms of the loan and consider carefully whether you wish to take the risk of co-signing. Should You Co-sign a Car Loan?If you, the co-signer, have a high level of confidence in the primary signer, and this confidence is backed by their solid employment record and income, then cosigning a loan for that person could be a great way to help a young adult, friend, or partner.Should You Ask Someone to Co-sign a Car Loan with You?Before you ask a family member or friend to co-sign a car loan, be sure you have the income and emergency funds saved to make all of monthly payments, and to do so in a timely manner. If you have any doubt that you will be able to manage the loan, then purchasing a car at this time is not a good idea.If you cannot make the monthly loan payments, then the financial burden will fall on your co-signer, which could hurt them financially, negatively affect their credit score (and yours), and damage your relationship with them. Why Savvy Consumers Choose CU SoCalFor over 60 years, Credit Union of Southern California has been proudly serving the Southern California community. We provide our members with checking, savings, personal loans, and other loan products with quick pre-approvals, no application or funding fees, and other unique advantages.We are known throughout the area for our excellent Member service and we are proud to be serving the community where we work and live. Apply For A CU SoCal Personal Loan Today!Please give us a call today at 866.287.6225 to schedule a no-obligation consultation with one of our loan experts, or use our fast and easy online application. |