Can a Cosigner or Co-Borrower Help Your Bad Credit Car Loan?

If you’re struggling to get an auto loan, a cosigner or co-borrower could help. Though they may sound like the same thing, cosigners and co-borrowers are different and can help you in different ways. Let’s take a look at how they differ, and how each one could help you get the bad credit car loan you’re looking for.

Do You Need a Cosigner or a Co-Borrower?

Can a Cosigner or Co-Borrower Help Your Bad Credit Car Loan?Both cosigners and co-borrowers can help you get an auto loan by adding their signature along with yours to a car loan contract. But how do you know which one you need?

You can determine whether you need a cosigner or a co-borrower depending on why you’ve been turned down for financing in the past. Cosigners are only for credit, while co-borrowers are for income, and possibly credit, as well.

The Car Connection Tip: Need an easy way to remember which is which when it comes to cosigner and co-borrower help? Just remember that if you’re turned down for an auto loan because your income is too low, you’re going to need to borrow some money, therefore a co-borrower could help.

Low Credit? Get a Boost from a Cosigner

If you’re looking for a bad credit car loan, a cosigner could give you the boost you need to get approved. In fact, if your credit is just on the edge of too low, a lender may even require you to have one. This is because a cosigner acts as a kind of safety net for a person with low credit.

When a cosigner signs the loan with you, they’re lending you their credit score and agreeing to make payments if you can’t. For this reason, a cosigner not only has to have a good credit score, they have to qualify for the loan individually just like you do.

Cosigners’ names aren’t on the vehicle title, but the way you handle the loan affects their credit just as much as it does yours. If you make all your payments on time and keep up with the loan, you and your cosigner both get the benefit of credit improvement. However, if you don’t keep up with the loan, both your credit and the credit of your cosigner drops.

The Car Connection Tip: It’s extremely important to make sure that both you and your cosigner understand the risks associated with cosigning an auto loan. If for any reason you can’t handle the loan, the lender is going to turn to the cosigner for payment – even after repossession, if need be. You should also be aware that not keeping up with a loan impacts your cosigner’s credit more than it impacts yours. The higher the credit score, the more it typically drops when negative marks like missed payments impact it.

Low Income? A Co-Borrower Could Help

When you don’t meet a lender’s requirements for income, adding a co-borrower to your loan may help. Unlike a cosigner, who can only lend you their credit score, a co-borrower can impact the outcome of your loan by combining their income with yours to meet the minimum income qualification. However, your co-borrower has to be your spouse in order to combine incomes.

When you add a co-borrower, the lender considers both of your qualifications as one, so your combined incomes, employment, and credit is used to meet lender requirements. Because these factors are a combination of both you and your co-borrower, they don’t have to qualify for the loan on their own like a cosigner.

A co-borrower’s credit is impacted by how you handle the loan, but unlike a cosigner, a co-borrower’s name is listed on the car title, which means they share ownership.

They also share responsibility to make sure that everything is paid on time. Anything that happens with a loan is recorded in your credit files and those of your co-borrower, including repossession if you don’t keep up with the loan.

Ready to Find Your Next Vehicle?

Cosigners and co-borrowers can both help you overcome obstacles when you’re getting an auto loan, but it’s important you know which one you need because they serve very different purposes when it comes to helping you get approved.

Once you’ve spoken with a potential cosigner or co-borrower to make sure they know the risks involved and are fully on board with you, you’re going to need to work with the right type of lender. This is where we come in.

Here at The Car Connection, we specialize in helping people get connected to the dealerships that have lenders available to work bad credit borrowers. When you work with the right lender, you may even find that you’re eligible for more of a car loan than you expected on your own.

We work with a nationwide network of dealers, and we want to help you find one in your area. Just fill out our easy auto loan request form, and get the process of finding your next bad credit car loan started today!


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