How to Cosign for a Car

A borrower who does not qualify for a car loan may be able to receive an approval by applying with a cosigner. A cosigner is often necessary when a borrower has no prior credit history, or when the borrower has a bad credit rating. The creditworthiness of the cosigner will determine whether or not a lender approves the car loan request. The monthly payment on the loan may affect the cosigner's decision to sign for the borrower, since the cosigner must be confident in the borrower's ability to make the payments on time.

Instructions

1

Talk with the borrower and ask why he needs you to cosign for the car loan. Find out if the reason is due to the borrower having bad credit, and ask what he is doing to repair his credit rating. If the borrower is not trying to repair any bad credit, you may want to consider denying his request to cosign until he shows that he is responsible for his debts. If the borrower is currently paying back his past-due debts, praise him for being responsible, but also let him know that he must not fall behind on the car loan that you cosign for.

2

Review the borrower's car purchase paperwork before you agree to cosign for a loan. Check the sales price to decide if the borrower is getting a fair deal on the car. Go online and search for a free car valuation website to help you determine the value of the car in relation to the purchase price.

3

Contact a lender and ask to speak with a car loan officer. Explain the reason for your call and set up a time to meet with the loan officer to fill out an application. Take a copy of your most recent pay stub with you to give to the loan officer. Make sure the borrower also takes a copy of a recent pay stub to the appointment.

4

Take the borrower with you when you meet with the loan officer. Ask the loan officer to explain what will happen if the loan payments are not made on time. Make sure the borrower understands that your credit rating is at risk when you are the cosigner on the loan. Have the borrower complete a loan application, then fill out your section of the application. Give the loan officer the pay stub copies and find out when you can expect to receive a decision on the application.

5

Review the loan terms once you receive an approval from the loan officer. Close on the loan and then go with the borrower to pick up the car. Take the loan check with you to give to the seller, unless the loan officer is handling the transaction. Reiterate to the borrower that you are also responsible for making the payments even though you will not be driving the car. Tell the borrower that you want to inspect the car each month to make sure it remains in good condition.