How to Get a Co-Signer for Car Financing

Various reasons can motivate car buyers to seek co-signers in order to get car financing. When a person just starting out in adult life gets a co-signer for his first new car purchase, it can be a good way for the young person to begin establishing credit, provided that the loan is handled responsibly. In many other cases, a borrower may be better off staying within his individual budget.

Instructions

1. Arrange for a co-signer before you arrive at the car dealership, since the co-signer arrangement is primarily between you and the co-signer.

2. Consider asking a parent or other relative to act as a co-signer if such financial issues will not overly burden your relationship with this person.

3. Expect that any prospective co-signer will want to engage in a candid discussion with you of any potential for default. Most adults are aware that the majority of co-signed loans end up being paid by the co-signer, and it is natural for a co-signer to want to protect his interests.

4. Read the small print carefully in any loan agreement involving a co-signer. Some commitments that you may want to make to your co-signer, such as conditions under which the co-signer would be held harmless, may be contradicted by the contract that you and the co-signer must sign in order to obtain financing.

5. Keep the various issues involving a co-signed loan separate. Your lender should not necessarily charge a higher interest rate because you have a co-signer. If anything, the co-signer's good credit should qualify you for a better rate.

6. Obtain a provision in writing, if possible, to allow you to remove the co-signer from your car-financing note after a certain period in which you have made all monthly payments on a timely basis.

Tips & Warnings

• As an alternative to getting a co-signer, you may be able to get financing in your own name if you are able to make a slightly larger down payment. A person whom you have identified as a potential co-signer may be more willing to provide you with a much smaller personal loan toward the down payment than to assume responsibility for the entire amount to be financed for the purchase of a new car.

• When a potential car buyer with bad credit seeks a co-signer because it is the only way he can get financing, he is creating a potentially dangerous situation for himself, the co-signer and their future relationship. A majority of co-signed loans eventually become the responsibility of their co-signers.