3 Ways a Cosigner Can Help on a Bad Credit Auto Loan

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


, - November 15, 2019

If you’re in the market for bad credit auto loan, you may be considering adding a cosigner to it. Having a cosigner isn’t always required, but it doesn’t hurt. In fact, there are three key benefits to having a cosigner on a car loan, and we’ll explain what they are here.

Benefit 1: Increased Approval Odds

The first – and possibly biggest – reason why a cosigner can help you with a bad credit auto loan is that they can help your approval odds. In fact, in some cases, a subprime lender may require borrowers with bad credit to have a cosigner.

Regardless of whether or not one is required, adding a cosigner with good to great credit is sure to increase your chances of getting approved compared to going it alone.

Benefit 2: Help You Build Credit

The second reason why a cosigner can help you out is because adding one can help you build credit. Car loans are a great way to improve your credit score over time, and you’re responsible for making sure the loan gets paid on time each month.

At the same time, if you don’t keep up with the monthly payment, you and your cosigner’s credit scores are going to suffer.

Benefit 3: May Help You Save Money

Finally, the last reason is that a cosigner could help you save money on the auto loan. It’s possible that a lender could qualify you for a better interest rate if your credit score is poor and you add a cosigner with a good credit score to the loan.

Dealing with interest rates is a big deal for bad credit car buyers, since they’re likely to be approved at one that’s higher than average. If you can get a lower interest rate with a cosigner, you could save hundreds of dollars on total interest charges over the course of your loan.

Cons to Having a Cosigner on a Bad Credit Auto Loan

While there are important benefits to having a cosigner on an auto loan, there are some disadvantages as well, but most affect the cosigner more than you, the primary borrower.

Your cosigner is signing a binding contract, which means they can’t just get up and walk away from the loan in the event that you decide to stop paying. They become responsible, and the lender can go after them to make sure the loan is paid.

The only way to remove or even add a cosigner to an existing car loan is to refinance. Unless your credit score has improved since taking out the loan, you may not be able to qualify to refinance, which makes it impossible to make any changes.

In addition, your cosigner’s buying power is also affected, which means their debt to income (DTI) ratio changes since the auto loan is included in this calculation. If they’re looking to take on additional credit themselves, whether it be a credit card or a new loan, they need to make sure that cosigning your loan won’t severely impact their chances of getting approved for new lines of credit.

Ready to Get the Financing Process Started?

A cosigner isn’t always needed, but having one can come with some major benefits if you need that extra push for approval. Now that you know just how a cosigner can help you get approved for bad credit car financing, are you ready to get the process started? If so, CarsDirect is here to lead the way.

We connect consumers to dealerships that have the resources to assist car buyers in many types of credit situations. We also have new and used vehicle sections so you can compare and research specific models you’re thinking about. Once you feel confident and are ready to find financing, start today by filling out our auto loan request form.

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


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