Lenders require borrowers to have cosigners if they are not creditworthy on their own. The cosigner offers the lender some security by agreeing to be held responsible for repaying the debt if the primary borrower defaults. To avoid having a cosigner, you will need to meet the lender's standards for creditworthiness.
Credit History
The main factor that lenders consider when evaluating your car loan application is your credit history. If you have consistently made on-time payments over a period of years, the lender can assume that you will handle your car loan responsibly as well. Because you represent a low credit risk, the lender will not require a cosigner. Some of the most important factors in your credit history include your payment history, the amounts you owe, especially on credit cards, and how long you have managed credit.
Large Down Payment
One of the ways you can make up for a mediocre credit history is to have a large down payment saved up. If you can pay for much of the purchase upfront, you will not have to apply for as big of a loan. The lender will be more likely to approve it because you are borrowing less and will have lower, more manageable monthly payments. The fact that you have the discipline to save a down payment will also work in your favor.
Steady Employment
Lenders for auto loans typically ask about your employment history and income on the application. If you have held a job with a good salary for a while, this is an indicator of financial stability and the ability to make payments on a car loan. If you are unemployed, have changed jobs frequently or make very little income, the lender might require a cosigner because you don't appear to be able to make payments on your own.
Tips
If you start preparing at least a year before buying a loan, you should be able to work on all three of the major factors that help you avoid having a cosigner. If you have never managed credit before, get a secured credit card, a retail card or a small personal loan and start making regular monthly payments. Also keep your credit card balance to a small percentage of your limit to improve your credit. Get a good job and save money out of every paycheck for a down payment. Also consider buying a used car instead of a new one so you do not need to borrow as much money. Plus, used cars depreciate more slowly than new ones, making them less of a risk for lenders.
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