Posted: Thursday, February 1st, 2018
If you’re being asked to co-sign for a car loan, keep the following information in mind:
- Co-signing a loan obligates you to repay the loan in full.
- If both the co-signer and the borrower don’t make payments, the loan will go into default.
- Make sure you have a clear picture of a borrower’s financial history before you agree to help.
- If the loan goes to collections, a creditor can take the same steps with the borrower and the co-signer.
Risks of Co-Signing a Loan
If someone comes to you and asks for your help with a loan, they may ask you to co-sign on it. Ask yourself the following questions before you respond:
- Can I Take on the Financial Burden of the Loan? – When you co-sign, you’re liable for any payments the borrower doesn’t make. You’ll also need to pay late fees and collection costs, so make sure the borrower is paying on time.
- What is the Borrower’s Financial History? – If the borrower has a bankruptcy or other credit problems, they’ll have a harder time getting a loan without a co-signer. However, it also might make the loan riskier for you.
- Has the Borrower Shopped Around? – A financing provider like Green Light Auto Credit specializes in helping customers with bad credit afford a low-interest car loan, and the borrower may not even need a co-signer.
While there are many dangers of co-signing a loan, there are a few advantages:
- The borrower will likely get a better interest rate with a co-signer.
- A lender may be reluctant to offer a loan without a co-signer if the customer has poor credit or has SSI or SSDI income, and acting as a co-signer can help them get the transportation they require.
- As the borrower makes payments, their credit score will slowly improve. That means they may not need a cosigner for their next car.
Learn More About Auto Loans at Green Light Auto Credit
At Green Light Auto Credit, we know the questions you should ask when financing, and you can turn to us for advice on different types of car loans. Our loan officers can assist with financing for dealerships nationwide, so fill out an application to get preapproval quick. Any questions? Contact us to learn all about co-signing for a car loan.
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