How To Get A Car Loan with A Cosigner | VAL Blog

Getting a Car Loan with a Cosigner


If you have a low FICO score or if you have not yet established a credit history, you may be denied for a car loan if you apply. Additionally, if your income does not meet the lenders 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 can be denied for a loan. 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. However, there is one way that lenders will consider providing a loan to people with no credit or bad credit, or if the borrower’s income does not meet the minimum. You can obtain a loan with a co-borrower, also known as a cosigner.

A co-borrower essentially partners with you to apply for your loan. Having a cosigner does not guarantee that you will be approved for the loan, but having a co-borrower with excellent credit will dramatic increase your chances of approval.

The Lender’s Requirements

Most lenders require that applicants have been on their jobs for at least a year to be considered for approval. Additionally, 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 lenders set this minimum at $1,500. Lenders, however, can set these minimums as they choose, so the minimums vary between companies.

If you are self-employed, getting an auto loan can be even more difficult. You will need to demonstrate that your income meets the minimum requirements of the lender, which may be a bit more difficult to do than if you worked a W-2 job. Many independent contractors and self-employed workers take business tax deductions to reduce the amount of their taxable income. In doing so, their verifiable income is reduced. If you are self-employed, and your tax returns from the past two years do not verify your monthly income at a minimum of $1,500, but you are sure you can cover the car payment each month, a cosigner can help you secure a loan for your next car.

Who Can Be Your Cosigner?

A spouse, a parent or a friend or relative can cosign for your car loan. However, asking someone to become a co-borrower on a loan with you is asking quite a bit. When a cosigner enters into a loan contract with you, the co-borrower’s credit is effected by your payment practices. If you are late on payments, your co-borrower’s credit will be damaged. If you cannot make the payments, the loan company expects the co-borrower to make the payments anyway. 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 must not be taken lightly. You must be sure that you can handle the loan payments before asking a friend or family member to consign for your loan.

Ideal Conditions for Co-Borrowing

A cosigned loan is ideal for individuals at certain times of life. For example, college students who have not yet had the chance to build a credit history may ask a parent or relative to cosign for a car loan. If the applicant has fallen on bad times, she may have a family member willing to help her get back on her feet again.

When you are ready to apply for the loan, Valley Auto Loans can help you secure the right lender. Valley Auto Loans specializes in matching lenders with borrowers who may have difficulty obtaining traditional bank loans. Complete one application on the Valley Auto Loans site to have your application forwarded to hundreds of lenders. Our job is to match you with lenders who will work with you even if you have no credit or less than perfect credit.

You can apply for a loan without a cosigner first to see if you qualify using the Valley Auto Loans comprehensive application process. Your matched lenders will advise you if you need to have a cosigner to get your loan approved. You have absolutely nothing to lose. Complete the application today and you can be driving your car next week.

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