Finding a Co-Signer for Your Auto Loan


Unless you have a reliable source of income and a well-established credit history, you may have a tough time obtaining an auto loan. However, a co-signer on board can improve your chances. Here’s a look at what a co-signer does — and how you can find one.

The role of a co-signer

If you cannot make payments on your loan, your co-signer is obligated to step in and repay the loan. An ideal co-signer has a solid credit score and enough income to cover your loan, should you run into a dire financial situation. On the flipside, it’s no good to bring along a co-signer whose financial situation is similar to yours. A reliable co-signer makes the lender more comfortable with issuing you a loan, despite your credit history, since you’ll have backup from an experienced borrower.

Finding a co-signer

Becoming a co-signer involves a certain amount of risk, so you’ll want to approach people who know you well and trust that you’ll pay back the loan. A family member, friend or mentor will probably be your first choice for a co-signer. However, asking a person to co-sign for you is essentially asking them to take a leap of faith. It’s best to have an honest discussion with your potential co-signer — here are some tips to help that conversation go smoothly. According to Justin Pritchard, a contributor to The Balance, you want to make sure that your co-signer is fully aware of your financial situations, so they understand the risks of what they’re agreeing to do. Be open about your job security, income, expenses and budget. Make sure you both know the details of the monthly payments, interest rates and if the loan offers any way to get the co-signer out from under the agreement. For instance, if you die or suffer a debilitating injury, check to see if your co-signer is released from payments or is still obligated to pay the loan.

Discuss the drawbacks

Pritchard also advises that you be realistic with your co-signer about the drawbacks they could face. In addition to paying off your debt if you’re unable to do so yourself, your co-signer may face fewer opportunities to receive loans for their own purchases. This is because creditors may be hesitant to loan money to a person who has pledged to take on another person’s debt, even if the co-signer has never had to make a payment. Furthermore, if you miss a loan payment, your co-signer’s credit may suffer.

No co-signer? Consider these options

If you can’t find a co-signer, Pritchard warns you to be wary of companies or individuals that offer paid co-signing services. This may be a ploy to gain access to your private financial information, so resist the temptation to accept help from those offering help online. In lieu of a co-signer, your best bet is to build (or rebuild) your credit score. You can achieve this by paying your bills on time, paying more than the minimum required by your credit cards and paying down your debt. According to Sienna Kossman of The Balance, you can also improve your credit with a secured credit card. If you are responsible with this card, senior financial analyst and CPA Riley Adams explains that it can take as little as six months to rebuild or cultivate a healthy credit profile.

If you’re lucky enough to have a co-signer on your loan, be responsible with your payments. Even with the safety net of a co-signer, work hard to repay the loan — your credit score and co-signer will thank you. If you and your potential co-signer need help figuring out a loan, consult a financial advisor.

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