What Are The Advantages Of Getting A Co-Signer For Your Vehicle Loan?
How can a cosigner help you get a loan? The role of your cosigner is to include themselves on the loan application, allowing the main borrowers to be approved for the loan. Cosigners are often needed for borrowers who have very little or no credit history and may not be approved without a cosigner.
If you’re asked to cosign a loan, you can benefit with an improved credit score. Of course, this is only if the main borrower pays the loan as agreed upon. If you co-sign a loan and they don’t pay it back, you’re on the hook for the amount.
3 Negative Aspects Of Being A Cosigner
The idea of a cosigner is to help a credit-impaired borrower be approved for a loan. However, there are risks to doing this, which is something a cosigner needs to be aware of before signing on the dotted line.
You’ll Be Asked To Repay The Loan – If the main borrower fails to make payments or defaults on the loan, the lender will come after you to make those payments.
Getting Multiple Lines of Credit Could Affect Their Report – A cosigner who agrees to sign for a loan will see it listed on their credit report. This can affect them in getting their own lines of credit, as other lenders will see that as being another debt. It doesn’t matter if the cosigner makes payments or not, it affects their debt-to-income ratio and could hinder them from getting credit of their own.
Taking Your Name Off The Loan Isn’t Easy – The only surefire way to get a cosigner off a loan is to refinance a vehicle. Once they sign their name to the application, they cannot remove themselves from the loan. If a person’s credit doesn’t improve during the loan to refinance, the cosigner will need to remain on the loan until it’s paid off entirely.
Cosigners should always keep in touch with their primary borrower to ensure payments are made and provide help when necessary. It’s important to do this before the lender comes after the cosigners for any missed payments.