A joint signer on a car loan is known as a cosigner. A cosigner secures your loan with his credit and income information, which also makes him equally responsible for your auto loan. The cosigner is also half owner of the vehicle you purchase; once the loan is paid off, your cosigner may release ownership of the vehicle to you.
Why Use a Joint Signer
If you can't obtain an auto loan on your own, you likely have credit or income issues. A joint signer's credit and income is used in addition to yours for loan approval. If your joint signer has excellent credit, you can take advantage of competitive interest rates that the joint signer would qualify for on his own. Credit issues also result in loan restrictions, such as down payment requirements or term restrictions. As a result, using a joint signer can lower your interest rate and lift loan restrictions to reduce your overall loan payback amount by thousands of dollars and lower your monthly payment.
Joint Signer Credit Considerations
The ideal joint signer should have good or excellent credit and a verifiable income. Many auto loan providers prefer at least a two-year employment and address history. Your joint signer will have to prove her income to verify that she can afford your monthly car payment along with other debts listed on her credit report. The lender will review the joint signer's entire payment and credit history to assess her debt-to-income ratio, or the amount she pays each month versus the amount she has coming in.
Auto Loan Responsibility
Because of the responsibility of the joint signer for your auto loan and its effects on credit standing, finding a cosigner may prove difficult. The joint signer is as responsible for the auto loan as you are. If you pay your auto loan late, the late payment is reported on your cosigner's credit report and will affect the joint owner's credit rating. If you default on your loan, the repossession is reported also listed on the cosigner's credit report. For this reasons, you should ask a close family member or friend to cosign your loan.
Ownership
Your joint signer is also partial owner of your vehicle. Once your auto loan is satisfied, the title is issued in both you and your cosigner's name. If you plan to sell your car or trade it in at anytime during or after your loan is satisfied, you'll need your cosigner's signature to do so. If the joint signer does not want you to sell your car, then he can choose not to sign the title to release ownership. You cannot remove a cosigner from a loan without your lender's and cosigner's permission.
0 comments:
Post a Comment