When Do I Need a Co-Signer for a Car Loan?

When Do I Need a Co-Signer for a Car Loan? Your car loan co-location can help you if you are having trouble getting a loan or if the rates offered to you are too high. This may happen if you have a low credit score, but it could also be because you have little or no credit history (for example, you are a recent graduate), your work history is short or you have other significant debts that are increasing.

When Do I Need a Co-Signer for a Car Loan?

Any of these can make it difficult (or impossible) to get a good loan because the lender sees you as a riskier borrower for their money. A co-signer with better credit can help you get the loan or get a better rate. Requirements can vary for different lenders, but you generally need someone who is willing to take charge of your loan with a good credit score () and enough income to pay off the loan if you are not.

It’s a big request to be co-sign

If a family member, partner, or friend with better credit is willing to co-sign the car loan, their ratings and additional income will ride the wave. The lender takes less risk because if you fall behind, your partner will be on the hook for the full amount owed and the lender or collection agency can go after them for the money. However, it can also damage their credit rating, which you used to get the loan in the first place.

Because of these things, asking someone to co-sign is not a light decision. It may seem like a fast track to getting a better loan for the car you want, but it can also be a fast track to damaging a valuable relationship. To avoid this, you should never use a co-signer to stretch into a vehicle that you cannot comfortably afford. You should also have enough money set aside to make sure there are no late or missed payments if you have unexpected expenses. On the plus side, if you pay the loan on time, it will also improve your credit rating and you may not need to co-sign next time.

car negotiating table illustration

When Do I Need a Co-Signer for a Car Loan?

The co-signer is not a co-borrower

Another risk your co-signing partner faces is that they are responsible for paying off the car loan but have no rights to the car. Unlike a co-borrower—usually spouses, partners, or family members who buy a car together—the co-signer does not share ownership of the vehicle and his name does not appear on the title. The car is in your name only and the participating site is not entitled to get it even if you default on payment.

Shop around first

If you need to go this route, you and your co-signer should shop around for the best loan before shopping for a car. As with any auto loan, fed you shop for the loan and get pre-approved before you go to an agency so you don’t feel pressured there.

The first step is to know your credit score before you shop. While a lender will consider other factors in a loan offer, such as employment history, credit score is a key factor. The three major reporting agencies (Equifax, Experian, and TransUnion) make their credit reports freely available at. Under federal rules, you can get a free report every 12 months, but during the COVID pandemic, they were providing free reports once a week until December 2023.

You and the co-signer also need to agree before shopping how much you can pay per month, bearing in mind that the co-signer agrees to cover full reimbursement alone if needed. It can help you figure out what your monthly budget means for the price of a car you can afford.

Then you are ready to search for auto lenders and compare prices. Not all lenders will accept jointly signed loan applications, so you’ll need to narrow your search to this question first. contains more detailed information on.

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