A co-signer is a person, usually a friend or family member, who guarantees to the lender that you will make timely payments. Cosigners are individuals with good credit scores who sign the loan application with the primary borrower. A co-signer willingly accepts responsibility for the loan in case the primary borrower defaults on the payment. Basically, a co-signer gives the lender assurance that the loan they are financing will be repaid, thereby greatly lowering the risk the lender is taking on financing a person with poor or no credit history.
The importance of having a co-signer when you purchase a car really depends on your credit history. If you have a poor credit score, or no credit history at all, a co-signer can significantly improve your chances of getting loan approval. Typically, a co-signer is only used in those cases where a person can not get financing on their own. If you are unable to qualify for financing because of poor or no credit, utilizing a co-signer may be necessary in order to qualify for an auto loan.
Every Situation Is Different
If you are unsure as to whether or not you will need a co-signer when you apply for an auto loan, talk to your lender and discuss what options may be available to you. For example, a large down payment can sometimes increase your chances for approval and negate the need for a co-signer. Remember, every situation is different, so it is best to talk to several lenders and discover all of your options.
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