Many people are afraid of taking on debt. People have a lot to lose regarding credit cards and loans, but sometimes you need them to buy a car or even get a mortgage. If you don’t think you can afford a loan, it might be time to talk to your bank about cosigning someone else’s car loan.
What is a Cosigner?
A cosigner is a person who agrees to take on your debt if you can’t pay it. This person, known as the guarantor, will be financially responsible for paying back the loan if you default on it.
It’s important to note that a cosigner is not a co-borrower. Even though you share responsibility for repaying the loan with someone else (your cosigner), they don’t have any ownership interest in whatever item or service you purchase with that loan. They’re simply agreeing to be held responsible for its repayment if something goes wrong and there’s no one else left holding the bag.
A cosigner doesn’t become an owner of property either. They just agree to pay off debts when those debts are due.
Do I Need One To Get a Car Loan?
A cosigner is not a requirement. If you have good credit, a decent income, and a solid plan for making timely payments, many lenders will let you take a car loan without a co-signer. However, some lenders, such as bad credit car dealers, require a cosigner if the applicant has a poor or limited credit history or insufficient income.
Before applying for any kind of car loan (or even getting approved for one), ask what requirements your lender may have. You can do this by calling them directly or looking online at their website’s FAQ section for applicants without established credit histories.
How Does a Co-Signer Benefit Me?
The benefits of having a cosigner go beyond just easier approval. When you have a strong credit history and income, it can be difficult to get approved for certain loans by yourself. A cosigner can help you get a better interest rate on your loan and lower down payments or smaller monthly payments.
Additionally, a co-signer can also help build your own credit by ensuring the car loan is paid off in full each month. Any late payments will hurt both of your credit scores, so it’s crucial that you’re diligent about making timely monthly payments.
Who Can Co-Sign Me?
The person who signs your car loan paperwork doesn’t have to be related to you or live in the same area as you do. They just need good credit and enough income that they’re willing to take on the risk of making payments if you don’t.
That said, many lenders will restrict which family members can cosign based on their relationship with each other. For example, parents can co-sign for children. But siblings can’t co-sign for each other because they’re considered too close of an association by the lender’s standards.
Yes, a cosigner makes it easier to get a car loan. If you have good credit and income, you may not need one. However, if you don’t have the best credit or income, having someone with good financials can help boost your chances of being approved for a car loan Calgary.