What is a cosigner? A cosigner is a person with good credit who signs on a loan so that someone with minimal or bad credit can get a loan. The cosigner can help someone get much better financing than they otherwise would be able to receive, but the cosigner must be willing to accept responsibility for the loan if the main person cannot pay it back. But who can be a cosigner?
A cosigner needs to be a person with excellent credit and a reliable source of income who is willing to guarantee your credit. They will become responsible for the loan if the main person taking it out defaults.
When is having a cosigner useful?
When a person has bad credit, or just hasn’t had a chance to build up credit, then a cosigner can help them secure a loan, or get financing at a better rate. It can also be helpful if you don’t have enough reliable income for a loan, or are self-employed. In this case a cosigner can help get better rates.
Read More: How Do You Check Your Credit History?
Does a cosigner have to be related to you?
While many people (for example, college students seeking their first car loan) may reach out to relatives like parents or grandparents to get a cosigner, a cosigner does not need to be related to you. However, they do need to be willing to take on the burden of a loan if the original person receiving the loan fails to make payments, so usually only the closest family and friends are willing to take that risk.
What responsibilities does a cosigner have?
At the end of the day, a cosigner is responsible for the entire loan if the main person defaults. They can also see a major drop in credit if the main person misses payments or simply can’t handle the loan. Cosigning, for all its advantages for folks without credit, or coming off a bankruptcy, can be a big risk for the cosigner. So if you are looking for someone to help you, be sure you can handle any loan you take out before looking for another person to cosign.
If you would like to get an affordable auto loan that you may be able to handle without a cosigner, contact us at Broadway Auto Credit and start on the path to a better credit future.