What To Know About Co-Signing a Bad Credit Auto Loan – Valley Auto Loans Blog

What To Know About Co-Signing a Bad Credit Auto Loan

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For many people, owning a car is a necessity. However, cars can be very expensive, and most people don’t have the money to purchase one outright. For this reason, they may seek a loan. Unfortunately, if they have bad credit or even no credit, this can be a burdensome task. There’s a way around this, though. If the buyer can find a qualifying second party to add their name to the loan, they have a much better chance of being accepted. This is great news for them, but it could mean trouble for you if you’re not careful.

If someone ever asks you to co-sign on their 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 a lot of strings attached, so it’s critical to understand the facts before signing your name on the papers.

Understanding Your Part

You should never sign your name on anything unless you know what you could be getting yourself into, especially if it’s a loan based on another person’s bad credit history. At Valley Auto Loans, we’ve been in the business long enough to be aware of this important issue. Furthermore, we’ve successfully aided numerous customers in getting the loan approvals they needed in order to buy a car.

In addition, our company gets much gratification from helping prospective car buyers steer clear of the sketchy buy here, pay here car lots by enabling them to submit a loan application on our website to find reputable dealerships nearby. We also go over the entire process of acquiring a loan with them, which helps minimize the risk of having their vehicle repossessed.


Unfortunately, the reality is that not all borrowers who have bad credit can fix this problem by themselves, and therefore would not qualify for the loan in this situation. For this reason, a second person may be able to help the buyer qualify for an auto loan with bad credit. This can be dealt with in two ways, and it’s important that you fully understand the differences between them.

There are two methods that 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.

  • Despite which category you fall into, either a co-signer or co-buyer, you share just as much responsibility for the loan as the main borrower. If this person neglects to make their loan payments for any reason, the lender will come to you for payment.
  • People in both categories are considered to be legal signatories. Besides the main borrower, a co-signer or co-buyer’s name is also on that loan and they will be required to sign the papers either way.
  • The main buyer isn’t the only one who can be affected by collections activities, such as garnished wages, if they default on the loan. Co-borrowers and co-signers can also be subject to these actions.
  • 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.

Income Makes the Difference

Although credit histories are taken into consideration with both co-signers and co-borrowers, lenders treat their income in different 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 main applicant’s if it will help them meet the qualification criteria of the loan. This is called co-mingling, and it’s often used to help someone qualify on a car loan. In many such cases, the co-buyer will be the applicant’s spouse.
  • Co-Signer: Although lenders take the credit history of the secondary party into consideration when verifying loan qualifications, a co-signer’s income will not co-mingle with the primary borrower’s income in order to satisfy those criteria. In these instances, both the co-signer and main buyer must qualify on an individual basis for the basic conditions presented by the loan.

Who Will Qualify?

As a general rule, it’s much easier for a person to get authorized for a loan as a co-buyer or signer when they’re a family member of the main buyer. In many instances, spouses are typically considered by lenders to be co-buyers. However, brothers, sisters, fathers, mothers, grandparents and adult children who sign onto the loan as a second party are often treated by lenders being as co-signers. This is because, in most cases, their income can’t be added to the income of the main buyer.

The Main Point

People sign their names on high risk finance applications every day without having understood the full implications of such an action, or without understanding the requirements of the loan. Unfortunately, this can have disastrous effects on their credit score in the event that the main borrower defaults or doesn’t pay. Furthermore, it can also eliminate a co-signer’s or co-buyer’s chances of qualifying for a future loan, and even leave them swamped with unexpected debt for a car they they didn’t technically buy.

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

We at Valley Auto Loans specialize in helping our customers find auto dealers who can help them despite their bad credit histories. Such car dealers are experienced, knowledgeable and will work alongside a broad array of different lenders to make certain that you have the best possible odds of being approved for your auto loan.

If you’re truly dedicated to getting your ability to get an auto loan back into good standing, then here’s your chance. Simply complete and send in your loan application today.

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What To Know About Co-Signing a Bad Credit Auto Loan by Jordan L Bourland