What's Required of a Cosigner on a Bad Credit Auto Loan?

Get Car Financing
Even with poor credit.

By

Contributing Writer

David Topham covers the automotive and auto finance industries as the Content Manager of Auto Credit Express who also contributes to CarsDirect. He was born and raised in Michigan and is a graduate of Michigan State University.


, Contributing Writer - January 10, 2018

A cosigner, provided they meet the lender's requirements, can help a borrower with bad credit get approved for a car loan. But in doing so, they legally add themselves to the loan.

What Does Being a Cosigner Mean?

With their signature on the dotted line, a cosigner agrees to pay back a loan in the event the primary borrower can’t, which guarantees the lender gets paid back. This could range from covering a single missed payment to being subject to collection action if the loan goes into default.

At the same time, the loan and payment activity appear on the credit reports of both the primary borrower and cosigner, meaning their credit scores can be impacted for better or worse. A cosigner's ability to get new credit can also be compromised because the loan appears as their debt on their credit reports.

Both parties should understand that there's no easy way out of a cosigned loan. The cosigner is on the loan for the long haul, unless the primary borrower can qualify for refinancing on their own.

Despite these drawbacks, cosigners can be an ace in the hole for borrowers with bad or no credit. Just make sure the cosigner meets the lender's requirements.

Cosigner Requirements on Bad Credit Car Loans

Here's what a lender requires out of a cosigner when the primary borrower needs one to qualify:

  • Good or Great Credit – A cosigner used to enhance a bad credit applicant needs to have good to excellent credit (typically a credit score of 700 and above). The lender will run the cosigner's credit to verify this.
  • A Qualifying Income – Both the primary borrower and the cosigner need to meet the lender's income requirements individually. On a subprime loan, typical income requirements are: a minimum monthly income of $1,500 to $2,000 and a maximum debt to income ratio of 45 to 50 percent. A good credit cosigner usually isn't required to verify their income with documents, while a primary borrower is.

Helping Bad Credit Borrowers Find Financing

Just a few short years ago, a borrower with bad credit almost assuredly needed a cosigner to qualify for auto financing. Today, that's not always the case. There are plenty of lenders with programs designed for consumers with less than perfect credit.

CarsDirect is teamed up with a nationwide network of dealerships that work with these types of lenders. We connect consumers with local special finance dealerships for free. All borrowers need to do to get started is submit our obligation-free auto loan request form online.

Need a Car Loan?

It only takes a minute.

, Contributing Writer

David Topham covers the automotive and auto finance industries as the Content Manager of Auto Credit Express who also contributes to CarsDirect. He was born and raised in Michigan and is a graduate of Michigan State University.


Loan approval is not guaranteed and is subject to credit application and approval of the lender. Individual loan terms may vary. Use of this website constitutes acceptance of CarsDirect.com's Terms of Use, Disclaimer, Privacy Policy, and Cookie Policy.