Pros and Cons of Having a Cosigner on an Auto Loan
- A cosigner with good credit can help you qualify or get cheaper car loan rates.
- Cosigners are legally responsible if the main borrower doesn’t pay, but they don’t have legal ownership rights to the car.
- If the borrower stops paying, the cosigner must pay or risk credit damage.
What is an auto loan cosigner?
Needing a cosigner can be frustrating, but it’s common, especially if you have bad credit, are new to credit or have a low income.
Car loan cosigners agree to pay the loan if the primary borrower — the person taking out the car loan — misses or stops making payments. Cosigners can be parents, other family members, friends or even a spouse.
Adding a cosigner with good credit reassures the lender that they’ll get their money back, making them more likely to offer you a loan or give you better rates.
Auto loan cosigners vs. co-borrowers
A cosigner helps you qualify for a car loan, while a co-borrower applies with you and shares equal ownership of the car.
Cosigners
- Responsible for paying off loan if primary borrower stops
- No right to the car, even when they make payments
- Credit impacted by late or missed payments
Co-borrowers
- Equal responsibility for loan payments
- Equal ownership of the car
- Credit impacted by late or missed payments
Pros and cons of using a cosigner
The benefits of using a cosigner with solid credit are evident — they can help you qualify for a loan when you otherwise wouldn’t. But using a cosigner comes with downsides, too.
Pros
- Can help you qualify for a loan
- Can help you save money with lower rates
- Can help you get a longer loan term
Cons
- Only helpful if cosigner has good to excellent credit
- Late or missed payments can hurt cosigner’s credit score, too
- Potential damage to relationship if you can’t make payments
Risks of being a cosigner
Being a cosigner doesn’t come with obvious perks beyond the knowledge that you’re helping someone qualify for a loan. But cosigning comes with plenty of risks and downsides, including:
| Risk | What it means | Consequence |
|---|---|---|
| Responsible for payments | If the borrower can’t pay, the cosigner must cover the loan and fees. | You may end up owing the full loan balance. |
| Credit damage and legal impact | Missed payments show up on the cosigner’s credit, and lenders can send the loan to collections or sue the cosigner if the loan goes into default. | Your credit might be damaged and you may face debt collectors or legal action unless you take over payments. |
| No ownership rights | Even if the cosigner pays, they don’t gain rights to the car. | You won’t have ownership unless you’re a co-borrower who shares the car title. |
| Harder to get credit | Cosigned debt counts toward your debt-to-income (DTI) ratio. | The debt will appear on your credit report and could make qualifying for new loans or credit harder. |
| Hard to back out | Cosigners can’t easily remove themselves from a loan. | You’re tied to the loan until payoff, sale or refinance. Some lenders also allow the borrower and cosigner to sign a cosigner release. |
Only cosign a car loan if you can afford to pay it off yourself. You can use the LendingTree car affordability calculator to see how much you can realistically afford.
To minimize damage to your credit, take steps to make sure you’ll know about late or missed payments. You can ask the lender for monthly loan statements or to tell you about missed payments. Otherwise, you can ask the main borrower to send proof of payment each month.
How to get a car loan with a cosigner
- Find a willing cosigner with good credit. Your cosigner must have good or excellent credit and a solid income in order to help you qualify and get better rates.
- Gather documents. Both you and your cosigner may need to show documents as proof of identity, income and residency. Prepare a government-issued ID, W-2s or 1099s and a lease agreement or mortgage statement.
- Fill out the application. Both you and your cosigner will provide your own financial and personal information — including your Social Security numbers — in the loan application.
- Close on the loan. If you qualify, both you and your cosigner will need to sign the loan agreement. Lenders may allow your cosigner to mail in the paperwork, but it’s possible you’ll both have to sign the paperwork in person. Some lenders (like Carvana) even require that the cosigner be present at the dealership for car pickup or delivery.
How to qualify without a cosigner
Improve (or build) your credit
The best way to qualify for a car loan without a cosigner is to improve your credit. Don’t have a long credit history yet? You can still build credit from scratch. If you need help boosting your score, use LendingTree Spring to track your credit and get personalized financial recommendations.
Bad credit car loans
It’s still possible to qualify for a car loan with bad credit, but you’ll likely pay high rates that make your car loan more expensive.
Put down more money
Making a bigger down payment can help you qualify for a loan you wouldn’t otherwise get. This may mean putting down more than the standard 10% to 20%. Save up money and apply again when you have enough to make a serious dent in the amount you owe.
Choose a cheaper car
A lender may not be willing to offer you a large auto loan, but you might qualify if you ask for less. Look for used cars or cheaper car models to decrease the amount you borrow.
Look for a first-time car buyer program
Your local credit union or even the car manufacturer may offer a first-time car buyer program with lower credit requirements. These programs are designed to help people new to credit get access to car loans and build their credit histories.
Frequently asked questions
A cosigner can make the difference between qualifying and not qualifying for a car loan. Here’s the good news: Many lenders will tell you if you need a cosigner to qualify after you’ve applied, so you may be able to apply on your own and add the cosigner later.
A cosigner stays on a car loan for the entire duration of the loan unless both the borrower and cosigner sign a release, the loan is paid off or the borrower refinances or sells the car.
Yes, a cosigner can be removed from an auto loan, but both people will have to sign a cosigner release or the borrower will need to refinance the loan. Some lenders don’t allow cosigner releases.
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