Getting an auto loan with a less than ideal credit score can be difficult. Even at CrediReady, where we have years of experience helping people get an auto loan with bad credit, some consumers have such a bad credit history that finding an affordable rate can be near impossible.
At times like these, your best bet is to bring on a cosigner to your auto loan. But what are some of the traits of a good cosigner and how will cosigning affect them?
Spotting a Good Cosigner
Essentially, a cosigner is somebody who enters into your agreement with the lender and lets you borrow their credit to improve your odds of getting approved and getting a more affordable interest rate.
Being a cosigner carries both risk and reward.
The cosigners credit will increase if you are able to make timely payments, but they also carry the risk of having to pay for your auto loan if you miss payments.
Missed payments will also lower your cosigner’s credit score as well.
Due to all the consequences that may arise if you default, it’s important to have a strong relationship with your cosigner and that you are able to communicate openly with them.
There are a few important things to consider when you are thinking of asking a friend or family member to become a cosigner on your auto loan.
Do they have a decent credit score?
Most likely, the biggest reason why you need a cosigner in the first place is that you have a less than ideal credit score, which can give you an unpayable interest rate if you sign for the car yourself.
If you both have less than ideal credit, bringing on a cosigner most likely will not help you get a more affordable rate.
Are they employed with a consistent income?
When you are being evaluated for an auto loan, one of the first thing creditors look at is your income and also your employment history.
If your cosigner has been at his/her position for over 1 year and has a consistent income, they might be a good choice.
However, if your potential cosigner has a spotty employment history and has odd jobs on the side, they might not be the best fit for you.
Do you have a healthy relationship?
This is potentially the most important trait you should look for in a cosigner.
Being a cosigner can be a massive responsibility and at times, it can be a test of your relationship with your cosigner.
If you were late on a payment and it hits their credit score, would you be able to work it out with you cosigner?
Know that asking somebody to come on as you cosigner on an auto loan is not a small favor. Essentially, that person is putting their credit on the line to get you into that new car that you need.
If you have been shopping around for the best rate on car loans, CrediReady can help you. Take a moment to fill out our free, confidential, no-obligation form today to see how much you can save!