If you’re looking to buy, or refinance, your dream vehicle, planning ahead is critical. There is no shortage of considerations, from your credit report to your budget. You may also need a co-signer, and it’s important to finalize one before attempting to secure a loan.
A co-signer on a loan agrees to pay any debt if the primary borrower does not complete payments. You may not meet all the requirements to take out a loan, so this secondary signature might be necessary. Your co-signer essentially takes on the responsibility in the event you do not pay on time, which can affect their credit score in the long run.
Reasons You Might Need a Co-Signer
One of the main reasons you may need a loan co-signer is having no credit or a history of bad credit. Maybe you just signed up for your first credit card, you don’t have any property in your name, or poor credit from your college days is creeping up on you. All of these reasons may necessitate a co-signer to get approved for the loan.
If this is your first car, or a refinance, your parents may be able to co-sign to get you started. However, it’s important to recognize that the loan will also affect their credit if not paid on time and in full each month. There should be mutual trust between the primary and the co-signer to ensure you stay on top of the bills.
How to Find the Right Co-Signer
Not everyone will be approved to co-sign. Some common co-signer requirements include:
- Good credit standing
- Proof of sufficient income to cover the loan if the primary does not pay
- A stable residence (5 years or more at one address is preferred)
If your co-signer meets these basics, they will likely be approved for the loan. However, you should never depend on your co-signer to pay monthly bills. It is difficult to remove yourself as a co-signer, and you risk damaging both your credit and theirs if you are not responsible for monthly payments.
Explore Your Financing Options
Gravity Lending provides custom, low-interest refinancing options for your auto loans. Our goal is to help you save money and pay back loans in a timely, reasonable manner. Contact us today to learn more about how we can help bring your payments back down to earth.