Getting A Car With A Bad Credit Cosigner
Before we jump into how to get a vehicle with a bad credit cosigner, we need to lay down the groundwork and understand the foundations of bad credit and a cosigner.
Auto Loan Cosigner Foundations
What is a cosigner?
A cosigner is someone who applies for the loan with you agreeing to pay the debt if you can. The cosigner, as the name says, is someone who signs the application of the loan with you, which eventually guarantees a loan. A cosigner stands by the borrower so that the loan provider has enough confidence to approve the loan. The lender believes that two people taking the loan is a safer bet, as there are now two people involved in paying the debt.
Why do you need a cosigner?
The most straightforward response to this question is that cosigning a loan makes the loan application attractive for the lender, and lenders are more inclined towards giving you better and favorable loan terms such as a low rate of interest, lower fees, and better flexibility.
People need a cosigner when they are incapable of applying for a loan alone. There can be many reasons a person would need a cosigner, such as bad credit report history, inadequate monthly income, or lack of credit history. You will also need to make sure you have a cosigner with a good/decent credit score as banks usually don’t provide loans to people with a bad credit score. However, if you have bad credit and can’t find a cosigner, no worries, we have put together a blog on how you can get a car loan with a bad credit score.
What is considered bad credit?
Bad credit is when a person has a history or poor loan payment history increasing the likelihood that in the future, that same person will not be able to make payments on time. A credit score is a representation of how good an individual is with timely payments and is also a reflection of your financial stability. When someone has a bad credit score, he or she may find it challenging to get a loan, borrow money at a reasonable rate because they are considered riskier investments that will not pay off. Here are the three things that you should remember when understanding bad credit:
- A person with bad credit will have a history of not making timely payments on bills
- Your bad credit is a representation of your low credit score, and that is usually under the score of 580 on a scale from 300 to 850
- All those people with bad credit will find it challenging to get the loan or obtaining a credit card.
A credit score can have a significant influence when it comes down to lenders deciding what interest rate should be suitable for you. You need to check your credit scores from different credit bureaus before you start looking for a car to buy.
Even if you have bad credit, getting a car loan is still a possibility. Just because you have been turned down by other dealerships doesn’t mean 500 Below Cars can’t get you a car.
What happens when I need a cosigner, but they have bad credit?
Having a cosigner with bad credit doesn’t necessarily mean that they cannot get a loan. The purpose of the cosigner is basically to help you get the loan.
There are two folds of having or becoming a cosigner. One is that you can bring someone who has a better credit score and payment history guaranteeing the loan in case the other party fails to do so. The other fold is that their income combined with your income can make a solid reason for you to get a loan and consequently increasing buyer’s power.
If you have a terrible score then or a low income, looking to get a car loan, one of the ways you can get this done is if you pay a hefty down payment. Lenders are more likely to approve your credit application, which has enormous equity at stake on the asset they are purchasing. So, if you are struggling to get approved for a loan, start saving up at least 30% of the down payment. A person with a bad credit score needs to show the lenders that they are not taking a significant risk on you.
So, if someone has a bad credit score, there is still a chance that they can be a cosigner. If the credit score is in the 500s, then it is relatively easier to get a loan, but that will come at a high-interest rate, but getting the loan will still be possible.
How is a cosigner treated for auto loans?
Getting a cosigner for auto loans can significantly help the borrower get a better rate at the interest and on the overall monthly payments. However, both the borrower and the cosigner need to be clear for the repayment expectation related to the loan. Loan providers and Auto financers often take a look at the late payments when the due dates are missed, so the loan contract must be studied carefully.
How do you find a cosigner?
Under standard cases, a cosigner is usually a parent or an elder sibling. It is difficult to get a loan on your own, especially when you are a student or recovering from student loans. However, having a family member to cosign is not always the only option.
Your next best option can always be the people you know and trust. Yes, it can be a bit awkward for someone outside your family to become a cosigner, but sometimes it’s the best option. Your friends can help you at the time when you need them.
How can 500 Below Cars handle it?
Now given all that information, you might be thinking that cosigning is difficult, and it is not easy to be a cosigner with bad credit, and that is why we are here. Your parent, a spouse, or the parent of the buyer under the age of 21 years can easily qualify as potential cosigners for you. As far as the credit score goes, it doesn’t matter. So if you like to schedule an appointment with us to see if we can help put you in a car today.