A cosigner can help you get the purchase of a car you need financed by providing an additional assurance of repayment. Those who have issues with their credit history can add a cosigner to the loan, which improves the credit worthiness of the loan application. There are requirements a cosigner will need to meet which you should know before asking a friend or family member to help you with a car loan.
Informed Agreement
Be sure your cosigner is informed of and understands what is being agreed to once the car loan is signed. By signing the loan papers, your cosigner is agreeing to repay the loan in the event you are unable to meet the required payments. Aside from the requirements the lender will set for the cosigner, you should be certain that your cosigner is a trusted and reliable person in your life that has a clear understanding of what signing your loan means.
Cosigner Credit Rating
The cosigner on your car loan will need to have a credit rating that meets the requirements set by the lender. Some people think that two applicants, the primary and the cosigner, with poor credit will be able to get the kind of financing a single applicant with good credit can. This, however, is incorrect. The cosigner needs to have a certain level of credit worthiness in order for the car loan application to be approved. Generally speaking, the lower your credit score is, the higher the cosigner’s rating needs to be.
Stable Work & Home
Most lenders will not list a stable job and home as cosigner requirements, but this kind of stability can fortify a loan application. A strong employment history and ability to maintain a steady home address indicates to lenders that your cosigner is a responsible and reliable person.
Proof of Income
The cosigner you've chosen to bring into your auto loan application will need to provide proof of income. The reason a cosigner is necessary for some car loans is so the lender is ensured repayment, which means whomever cosigns your loan needs to be able to afford the payments based on a provable income. There are two ways a cosigner can provide proof of income, recent pay stubs or the previous year’s tax returns.
When your own credit rating, income, or a combination of both prevents you from getting approval on a car loan, a cosigner can be of assistance. Make sure the cosigner you choose is able to meet the lender’s stipulated requirements.
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