Do Cosigners Help with Bad Credit Car Loans?
When bad credit car loans feel impossible to secure alone, a cosigner can help your application get approved. But what does adding a cosigner do exactly, and what risks are there? At PA Auto Credit, we help buyers understand exactly how cosigners work and whether this strategy makes sense for their financial future.
How Cosigners Strengthen Your Loan Application
Adding a cosigner with strong credit merges their financial reputation with yours. Lenders review their income, credit score, and debt-to-income ratio alongside your own. This combined profile often unlocks approval where a solo application might fail. As long as your cosigner has a solid credit history, they may also help reduce your interest rates, too.
Understanding the Risks Both Parties Face
Cosigning creates equal legal responsibility for the debt, as the loan appears on both your and your cosigner’s credit reports. If you miss payments, your cosigner’s credit score drops alongside yours, sometimes by 50 to 100 points per late payment. Your cosigner may not be able to remove themselves from the loan without refinancing. The financial obligation continues until the loan reaches zero balance, typically spanning 60 to 72 months for bad credit car loans.
Alternatives to a Cosigner for Bad Credit Car Loans
If you’re unsure about using a cosigner, there are a few other options that may help you get approved. Consider building your credit through secured credit cards for six to 12 months. Contributing a larger down payment reduces lender risk and may also eliminate the cosigner requirement entirely. Trade-in equity serves the same purpose, lowering the amount you need to finance.