Benefits of Cosigned Car Loans

Although Cosigned car loans are not a borrower's first choice, they can be a good alternative for the consumer that requires a little assistance.

Cosigned Car Loans Help Borrowers Get A Car

For many, especially those under 18 and still living at home, a co-signor is the only way to get financed for a car.  A cosigner is responsible adult that will sign and agrees to make payments in the event the primary consumer fails to do so.  If the borrower is a teenage son or daughter, the best bet is to have a parent as car loan cosigner.  If the payments are not made on time, the credit scores of all borrowers suffer.

Potentially Get A Better Interest Rate

Consumers with no credit or bad credit histories can pay higher interest rates. With a cosigner, however, borrowers are sometimes offered lower rates or better terms.  The cosigner's credit history and credit score will help to dictate the loan terms. Borrowers whose cosigners’ credit scores are excellent, without derogatory items, are able to obtain lower interest rates.

Consumers With Bad Credit

If a consumer has a credit score of below 550, they are considered a high credit risk. Additionally, student loans are also weighed against the consumer's overall credit rating.  With a cosigner, banks and lending institutions will then look more favorably at cosigned car loans because they carry less risk to the lender because in the event of payment default, lenders will procure the money they are owed from the cosigner.

Cosigned Car Loans Can Repair Bad Credit

Over a period of time, making monthly payments on time every month on a cosigned car loan will help repair a borrower's bad credit history and help raise overall credit score. Making payments on time, accounts for 35 percent of your credit score. Once repaired, it may be possible for the borrower to get other loans without a cosigner.

Relatives May Do Cosigned Car Loans

The best cosignor candidates are family member or close friends.  The cosignor will need to have and believe in the person's intent and ability to stay on top of the financial obligation.

Bottom line is: for consumers who need a car, but can not get a car loan on their own (or want better rates), should consider cosigned car loans. They may just be the solution to short- and long-term goals for financial responsibility.


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