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Being a cosigner can be risky, especially when dealing with damaged credit. It can also be the only option in some situations, so is it a good idea?
Factors to consider.
Before anyone agrees to become a cosigner, they really need to know as much as possible about the situation. They also need to know about everything and everything that could affect them personally.
We at Valley Auto Loans understand situations such as these, and me make it our mission to make sure that everyone is fully informed and prepared to take on such responsibilities.
What is a Co-borrower?
In some cases, a loan applicant will be denied due to their damaged or poor credit. In this case, a person with good credit must step in to offer their credit as an alternative.
Those with good credit can usually qualify and be entered into to the finance contract in either of two ways: as a co-buyer, or a co-signer.
Co-buyerrs and co-signers are similar due to:
1. Both types are responsible for the loan and are considered co-buyers, with the primary borrower. If the primary borrower fails to meet the loan requirements, co-buyers and co-signers then must make the loan
2. Both types must place their signature on the loan contract.
3. Along with the primary borrower, both types can be subjected to a collection if the loan goes into default.
4. Lenders will review and analyze the credit of both the borrower and co-borrower.
Co-buyers and co-signers differ because:
1. Lenders name a co-borrower as either a co-signer or a co-buyer based upon their income in comparison to the primary borrower.
2. A co-buyers income amount can be added to the primary buyer’s if their income is not high enough to qualify them for a certain loan.
3. A co-signer’s income cannot be added to the primary buyer’s however. Instead both parties’ incomes must qualify separately.
More details on co-borrowing.
It is far easier to be approved as a co-signer if you are closely related to the primary borrower. For example, spouses are almost always approved to the ease of income-mingling.
The responsibilities of being a co-borrower.
For those considering becoming a co-borrower, consider these facts:
Co-borrowers bear full responsibility for the loan in the event that the primary borrower fails to follow the loan’s requirements.
Co-borrower’s credit can be damaged if the loan has a negative end result, (Failure to make payments or other contract breach).
Becoming a co-borrower can be the only available option if someone you know needs a loan, and if you have a good credit score and the ability to make the payments if the primary borrower cannot, then it is an easy issue. However if you also fail to meet the requirements of the contract, it can greatly damage your credit.
We at Valley Auto Loans want you to know that even those with bad credit can be approved for a loan instantly. If co-borrowing or needing a co-borrower is a risky deal for you, we can help. Apply for a loan from Valley Auto Loans today and see just how easy it is to gain a loan, even with bad credit.
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