Depending on your credit and financial situations, you may not need a cosigner to buy a car. But when dealing with a subprime lender, it’s possible they may ask you to have a cosigner in order to approve you for financing.
Do You Need a Cosigner to Buy a Car?
Whether or not you need a cosigner to buy a vehicle depends on the lender and your credit. Just in case a lender does ask you to have one, make sure your potential cosigner meets the requirements and understands what the cosigner’s role is.
Before you head to the dealership to seek financing, if possible, you should have a cosigner available just in case. If you’re still unsure about needing a cosigner, here are three common scenarios where one may be necessary:
- Your credit is less than perfect: If you’re a first-time car buyer with no credit history, or you're simply struggling with credit, utilizing a cosigner can help you get approved for an auto loan. A cosigner must have good credit, because you essentially “borrow” their credit in order to qualify. With their credit tied to your loan, the cosigner is responsible for it just like you are, and their credit is affected if you miss payments or default on the loan.
- You need to add a source of income that’s garnishable: Subprime lenders like to see garnishable income because they can collect debts on this type of income. If you have a fixed income that isn't garnishable, such as social security or disability, a lender may require a cosigner with a garnishable income. As long as the cosigner has this type of income and meets the lender's requirements, they can help you get approved.
- You need to increase your income: Subprime lenders have minimum income, debt to income, and payment to income requirements you must meet to get approved. If you don’t meet all three, you won’t qualify. But, if you have a spouse that’s willing to be a co-buyer, you can combine incomes to meet the lender’s requirements. It’s important to note that you can’t combine incomes with a cosigner. While they sound similar, cosigners and co-borrowers are very different.
Buying a Car with No Credit and No Cosigner
If you have bad, little, or no credit but don’t have a cosigner available, you can still buy a vehicle, but your financing options are limited. In most cases, your next option is to find a buy here pay here (BHPH) dealership.
BHPH dealers finance cars in-house, so everything is done in one place. These BHPH lots don’t typically run credit checks, and use your income to qualify you. But because they don’t run credit checks, most of these dealerships don’t report loans or on-time payments to the credit bureaus, so your credit score isn’t going to improve. In addition, the vehicles on these lots are generally older, so don’t expect to finance the car of your dreams.
Need Help Finding a Dealership to Work With?
Just because your credit isn’t perfect doesn’t mean you can’t get a car loan. You just might need some extra help from a trusted cosigner or co-borrower. Make sure you discuss the cosigner’s responsibilities with them before you both sign the loan documents – you don’t want them to be left in the dark.
Whether or not you have a cosigner ready, if you need help getting started in the car buying process, we want to help. At The Car Connection, we work with a nationwide network of special finance dealers that have the lending resources you need. Getting the process started is easy. Simply fill out our no-obligation auto loan request form today, and we’ll get to work matching you with a local dealership.