Last Updated On: October 31, 2016

How To Get A Car Without A Cosigner

cosigning a car loanSome lenders may suggest co-signing for a car loan will help you get the car loan you are applying for if you have bad credit. This is not always necessary and should be a last resort.

Many factors in an individual’s credit history may prevent them from qualifying for an auto loan with a great APR. If you have a low FICO score or if you have not yet established a credit history, you may be denied a car loan if you apply at most lending institutions. Additionally, if your income does not meet the lender’s minimum requirements, you could be turned down for a loan.

If you are employed but have only been on your job a short time, you will have a hard time getting an auto loan from a dealer. You can also be denied if you have an existing car loan, or if you have lived at your current residence for a short time.

Many lenders will not consider giving a loan to people with no credit or bad credit If the borrower’s income does not meet the minimum required.

With someone “co-signing for a car,” you can obtain a loan, but you need to understand the responsibility and risk they take on.  The cosigner is also known as a co-borrower because they are jointly responsible for the borrowed money.

Cosigning a car loan

A co-borrower essentially partners with you to apply for your loan. Having a cosigner for a car or co-borrowing does not guarantee that you will be approved for the loan. Having a co-borrower or cosigner with excellent credit will increase your chances of approval, and we will explain the difference further on this page.

First, let’s See if You Need Cosigning For a Car Loan

Anyone who has bad credit must understand how their income is reported and viewed. The amount of net income a person makes plays a huge role in the approval process for an auto loan. If income is not reported correctly, it can have an adverse impact on the approval process.

At Valley Auto Loans, we specialize in helping consumers get approved for auto loans. We understand the role that bad credit plays in the approval process, and we do everything we can to get customers approved even if you think you need a cosigner. We work with a vast network of high-risk lenders that provide loans that can rebuild credit, so we know what they expect from a credit application.

Know The Requirements

Loan Approval Requirements For No Cosigner

There are several requirements that a person must meet for approval with bad credit car loans that won’t require a cosigner. After many years of experience, we’ve witnessed many people qualify for auto loans they couldn’t get with other auto lenders.

Reporting Income

Most lenders require that applicants have been on their jobs for at least a year to be considered for approval. Lenders usually require a minimum FICO score. For many lenders, this minimum is a credit score of at least 520. You must also make a minimum amount of income each month. Many banks set this minimum at $1,500. Lenders, however, can set these minimums as they choose, so the minimums vary between companies. This is what makes qualifying for a car loan for low-income families possible.

Self Employed Reporting

Once an independent contractor (Self Employed) has received their 1099 forms, he or she must report their income on a Schedule C form, which reveals their net income.

The net income calculated with the Schedule C is transferred to a 1040 federal tax return form. A lot of self-employed contractors choose to report more expenses than they had, and this can cause some problems. When doing business with an independent contractor, lenders look at how much net income the contractor reported on their tax return.

A credit lender will also use the net income figure to decide an applicant’s debt-to-income ratio and what type of car the person qualifies for. If you are self-employed, your tax returns for the past two years must verify your monthly income at a minimum of $1,500. If m not, you may need a cosigner. Make sure you can cover the car payment each month before asking a cosigner to help you secure a loan.

Problems with Income

Most high-risk lenders will only help people who make a certain amount of monthly income, but fortunately, the income requirements are usually quite small. If a person is making the required amount of net income, then it would seem like he or she would automatically be approved for the loan. However, it gets a bit trickier. Monthly expenses must be factored in along with the car payments, which could include utilities, mortgage, and rent.

Once these costs are added to the equation, the applicant ends up having a debt ratio that is too high, so the lender denies the application then a co-signer for the car loan may be required.

Tips for Getting Approved With No Cosigner and Bad Credit

There is no doubt that it can be difficult to get an auto loan if you have no cosigner and bad credit. However, car shoppers do not need to have established credit, and they do not need to have someone co-signing a car loan. They can use special poor credit auto lenders who look closer at the individual’s income and their ability to pay back the loan.

With a decent down payment and the right lender, it is possible to get approved for a car without a co-signer. People who manage to get accepted will probably end up paying high interest but will have a loan without someone co-signing a car loan for them.

To increase the chance that you will get approved, there are several tips that you can use when shopping for an auto loan.

Get Your FICO Score

If you are serious about getting a bad credit auto loan, you need to know your credit score. Without a credit score that is above 500, it can be difficult to qualify for any loan. If you have especially poor credit, a larger down payment can help you get approved.

Anyone who is going through bankruptcy might want to hold off on trying to get approved for an auto loan. For a bankruptcy in progress, even someone co-signing a car loan will not help unless your bankruptcy judge approves it.

You will also need to understand what an Auto Industry Credit Score is. This is the FICO report that most dealers and auto loan lenders use because it deals directly with your past auto loan history. This report will give you a different credit score than the regular report. If you have paid you auto loan off on time with no late payments your score may be higher but if you have had some trouble with the last car loan this report will probably assign you a lower score.

Save Some Cash

When trying to get approved for any loan, it helps if you have a large amount of money to use. You can improve your chance of getting approved for a bad credit car loan if you have enough cash to use. A large down payment will show your commitment to paying for the car. High-risk lenders like to see a bigger down payment because it helps to reduce the amount of risk that they must take.

Be Honest

Although this tip is very straightforward, it is extremely powerful. When working with a high-risk lender, you want to be upfront and honest. You should fill out the credit application with complete honesty and make sure you answer the questions thoroughly. By just being as honest as possible, you can increase your chance of getting approved.

Who Can Be A Cosigner?

If you need a co signer for a car loan, you have to find someone with sufficient credit. A spouse, a parent or a friend or relative can be a co-borrower or cosigner on your car loan. However, signing on high risk car loans for someone else is taking on the financial responsibility of the loan for someone else.

When a cosigner enters into a loan contract with you, the co-borrowers credit is affected by your payment practices. If you are late on payments, your co-borrowers credit will be damaged. If you cannot make the payments, the loan company expects the co-borrower to make the payments nevertheless. If the car is repossessed, the cosigner’s credit is very adversely affected.

Finally, even if everything goes smoothly, and you make the scheduled payments, your loan still counts on the cosigner’s debt-to-income ratio should he apply for credit in the future. Therefore, entering into such an agreement should not be taken lightly. You must be sure that you can handle the loan payments before asking a friend or family member to cosign for your loan.

Ideal Conditions for Co-Borrowing

Co-signing for a car loan is ideal for people at certain times of life. For example, college students who have not yet built a credit history may ask a parent or family member to cosign for a car or student loan.

If the applicant has fallen on bad times, they may have a family member willing to help them get back on their feet again, use cosigner auto loans.

What a Cosigner or Co-Borrower Should Know Before Signing

If someone ever asks you to co-sign on for a car loan, you might want to stop and consider how this could affect you. Acting as a co-signer on a car loan for someone with bad credit comes with many strings attached, so it is critical to understand the facts before signing your name on the papers.

If you are thinking of cosigning a car loan for someone, you will be responsible for the loan. The lender can force you to pay if the other person cannot or does not want to. You are telling the bank; you will be responsible for seeing that the other borrower pays the loan or you will.

You may end up paying for a car you do not own or drive.

Understanding Your Part As A Co-Borrower

You should never sign your name to anything unless you know the risks of co-signing a car loan, especially if it is a loan based on another person’s bad credit history.

You are being asked to cosign because your credit is in good shape. Cosigning a loan for a family member will not help the other borrowers credit because the loan was held by two people.

At Valley Auto Loans, we have been in business long enough to be aware of this important issue. We have successfully assisted many customers in getting the loan approvals they needed to buy a car without a co-signer. Buyers with bad credit and no cosigner have other avenues they can try.

The Difference Between a Cosigner and a Co-buyer

Two methods can be employed to add another person to a bad credit car loan: by adding a co-buyer or a co-signer. While the terms are different, these methods have some similarities.

Although credit histories are considered with both co-signers and co-borrowers, lenders treat their income in various ways. Indeed, depending on how their income differs, banks classify the second party as being either co-borrower or co-signer.

  • Co-Buyer: This person’s income can be counted as part of the primary applicant’s if it will help them meet the qualification criteria for the loan. This is called co-mingling, and it is often used to help someone qualify for a car loan. In many such cases, the co-buyer will be the applicant’s spouse.
  • Co-Signer: Lenders take the credit history of the secondary party into consideration when verifying loan qualifications. However, a cosigner’s income will not co-mingle with the primary borrower’s income to satisfy those criteria. In these instances, both the co-signer and principal buyer must qualify individually for the fundamental conditions presented by the loan and the car payments.
  • Despite which category you fall into, either co-signing or co-buying, you share just as much responsibility for the loan as the primary borrower. If this person neglects to make their loan payments for any reason, the lender will come to you for payment.
  • Individuals in both categories are considered legal signatories. Besides the principal borrower, a co-signer or co-buyers name is also on that loan, and they are required to sign the papers either way.
  • The primary buyer is not the only one who can be affected by collections activities, such as garnished wages, if they default on the cosign car loan. Co-borrowers and co-signers can also be subject to these actions. In most cases, the lender will go to the cosigner first because their credit is in good standing.
  • When handling a loan application, the lender will look at credit reports for both the primary borrower and the co-signer or co-borrower and use this information to make their decision.

Also, our company gets much gratification from helping car buyers steer clear of the sketchy buy here, pay here car lots. We are giving them a chance to pre-qualify and send a loan application on our website to find reputable dealerships nearby.

Cosigning A Loan Responsibilities

People sign their names on high risk finance applications every day without understanding the responsibility of such an action, or without understanding the requirements of the loan. Co-borrowers bear full responsibility for the loan. Unfortunately, this can have disastrous effects on their credit score if the primary borrower defaults or doesn’t pay. It can also eliminate a cosigner’s or co-buyers chances of qualifying for a future loan, and even leave them swamped with unexpected debt for a car they did not technically buy.

Risk Of Cosigning A Car Loan

If you choose to co-sign your name on an auto loan agreement for someone with a poor credit history, it is essential that you understand precisely what you are saddling yourself with. This includes the potential issue of having to pay on the loan by yourself should the primary buyer fail to do so for any reason.

If you need to finance a car but have no cosigner and bad credit, you do not have to feel like it is the end of the road. Valley Auto Loans has an excellent approval rate, and we can get you the financing that you desperately need.

Even if you have no credit or less than perfect credit we specialize in helping, our customers find auto dealers who can help them despite their bad credit histories. Such experienced car dealers are knowledgeable and will work with many different lenders to make sure that you have the best possible chance of being approved for your auto loan.

If you are truly dedicated to getting an auto loan or refinance your current loan that will improve your credit over time, then here’s your chance. Just complete and submit your loan application today. You may find getting a cosigner for a car loan may not be necessary.