back to articles | October 30, 2022 | Alice Jenson
Categories:   Auto Loans & Financing
The Pros and Cons of Having a Co-Signer on Your Car Loan
Many people choose to have a co-signer on their car loan in order to secure a lower interest rate. But what are the other pros and cons of having a co-signer? In this blog post, we'll take a look at some of the potential benefits and drawbacks of having someone co-sign your auto loan.
The Pros of Having a Co-Signer
One of the biggest advantages of having a co-signer on your car loan is that it can help you get a lower interest rate. Lenders typically charge higher interest rates to borrowers who are considered high-risk, such as first-time borrowers or those with less-than-perfect credit histories. But if you have a co-signer with good credit, the lender will view your loan as less risky and may offer you a lower interest rate as a result.
Another advantage of having a co-signer is that it can help you get approved for the loan in the first place. This is especially true if you're still working to build up your credit or if you have bad credit due to past financial mistakes. Even if you have a steady income and could technically afford the monthly payments, lenders may still be hesitant to approve your loan without a co-signer.
- A co-signer with good credit can help you get approved for a loan.
- A co-signer can help you get a lower interest rate.
- A co-signer can boost your credit score over time, as long as you make your payments on time.
The Cons of Having a Co-Signer
Of course, there are also some potential drawbacks to having someone co-sign your car loan. One is that it puts unnecessary strain on your personal relationships. If you're not able to make your monthly payments on time, not only will your credit suffer, but so will your relationship with the person who co-signed the loan for you. It's important to be 100% sure that you'll be able to keep up with the payments before you ask someone to co-sign for you.
Another downside of having a co-signer is that it gives the lender the legal right to go after them for any missed payments. This can put both your own and your cosigner's finances at risk if you're not careful. And finally, even if everything goes smoothly and you make all your payments on time, having a co-signer can still negatively impact your credit score—albeit not as much as missing payments would.
- You are responsible for repaying the entire loan, even if your co-signer is the one who is actually using the vehicle.
- If you default on the loan, your co-signer's credit score will be impacted negatively.
- Your co-signer will be responsible for the vehicle if you decide to leave the country or declare bankruptcy.
- Cosigners may be difficult to find if you don't have any close friends or family members with good credit.
- If you do find a cosigner, they may be hesitant to agree to such a risky proposition.
So there you have it—the pros and cons of having someone co-sign your car loan. As with any decision involving money, it's important to weigh all your options carefully before moving forward. Be sure to talk things over with the person you're considering asking to be your cosigner—after all, it's just as big of a decision for them as it is for you!