How to Get Approved for a Car Loan With a Cosigner

When you have your heart set on a new car, the last thing you want to hear is that your loan application was rejected. However, it does happen due to poor credit or a lack of credit history. The good news is that the lender may still approve you if you have a co-signer. A co-signer serves as the guarantor and tells the lender that regardless of what happens, the co-signer will repay the loan if you cannot. Co-signers lessen the risk a lender takes on.

Instructions

1

Review your credit score; get a free copy at AnnualCreditReport.com. If your credit score is significantly below 600, take steps to improve your score before you apply for a car loan. If your credit score is 400, for example, even a co-signer is unlikely to get you approved for a loan.

2

Determine who you should ask to co-sign. The co-signer must have good to excellent credit, which is typically considered a score of over 650. Tell the co-signer that his signature guarantees he will repay the loan if you cant. Explain that any late payment made by you also reflects as a non-payment on his credit report.

3

Apply for a personal loan or an auto loan. If youre buying a used car, and youre applying for a loan through a credit union or bank, you may have to apply for a personal loan if the car is more than 10 years old or has high mileage. Personal loans typically come with higher interest rates, but your car doesnt serve as collateral, which means the lender cannot take your car should you default. The co-signer must still repay the loan if you default, however.

4

Offer a larger-than-normal down payment if the lender rejects your initial loan application with a co-signer. A 20 percent down payment is standard. Offer a down payment of 30 percent to 35 percent if the lender rejects your loan application. A larger down payment pays for depreciation and also makes the lender more willing to give you a loan, because the lender isnt risking as much money.