A cosigner is about to sign for the keys of a used car

What Does a Cosigner Do for a Car Loan?

Milad Hassibi February 21, 2019

Having less than perfect credit can make it difficult for many to get the new car they need. If you have tried to purchase a car with bad credit, you may have been asked to bring on a cosigner. A cosigner shouldn’t be just anybody – they have to meet many cosigner requirements and understand the responsibility that comes with cosigning.

What Does a Cosigner Do?

A cosigner sings a loan alongside the primary borrower in order to help the primary borrower qualify for financing. Cosigners have no legal rights to own or drive your vehicle, but are required to cover payments if the primary borrower begins to fall behind on their auto loan.

A couple looking at cosigning with the approved stamp over them

If the loan is paid off on time each month, the cosigner will experience a positive impact to their credit score.
If the loan goes unpaid, the lender has the legal right to repossess the vehicle and file collections claims against either the primary borrower or the cosigner. Both the primary borrower and the cosigner will experience a significant drop in their credit scores.

When a cosigner signs for an auto loan, they are legally bound and obligated to the contract. A cosigner cannot simply back out of cosigning after cosigning for a vehicle.

The only way a cosigner can be freed from a loan is if the primary borrower refinances the auto loan.

Cosigner Requirements for an Auto Loan

What qualifications does a person need to have in order to become a cosigner? A cosigner will almost always have to have a healthy credit score to counteract your less-than-perfect credit score.

Most lenders will ask that a cosigner you bring on has a credit score of 700 or above, but this can vary depending on your lender and location.

A cosigner is not required to live in the same area or even the same state as the primary borrower. However, some lenders may require that the cosigner be there in person to cosign the auto loan documents.

A cosigner must also be a United States citizen, not a permanent resident. Unlike other lending scenarios, most lenders will not care about where a cosigners income comes from.

A lender may accept a cosigner who is on social security or disability insurance. As a rule of thumb, if your cosigner has good credit, they will typically qualify for an auto loan.

Final Note

If you are in need of a new car and have less than ideal credit, having some cosigners lined up can help increase your odds of approval. Be sure to speak to this person about the serious consequences that are associated with cosigning for an auto loan. The more open the communication you have early on, the less problems you will have in the future.

If you are looking to buy a new car but have less than perfect credit, CrediReady can help. Our nationwide network of trusted dealers and verified lenders work with buyers in all credit situations. Take a moment to fill out our free no-obligation loan inquiry form and start shopping for your dream car today!

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