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Being a Co-Signer On a Car Loan: Everthing You Need To Know

Being a Co-Signer On a Car Loan: Everthing You Need To Know

Being a cosigner on a car loan is your opportunity to do some good and help someone out. Unfortunately, not all the facts are always made available to the cosigner, leaving them exposed in ways they didn’t realize.


We want you to fully understand what you’re getting into so we asked our auto loan team to outline some lesser-known facts about being a cosigner on a car loan.

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You're Equally Responsible for the Loan

While the loan is in someone else’s name, your name is also on the contract. That means when being a co-signer for a car loan you both have to be responsible for the loan.


It may not be up to you to make the payments, you still have to monitor the situation and make sure whoever you’re cosigning with is making payments.


It’s Hard to Get Out of a Co-Signer Auto Loan

It is difficult, but not impossible to remove a cosigner from an auto loan. It is also difficult to remove yourself as the cosigner.


The loan contract is binding and you will have to go to great lengths to try to remove yourself from it. Not all lenders will permit you to remove yourself as a cosigner unless there’s a very good reason.


If you’re the primary borrower, your only way to remove the cosigner is to refinance the loan. That depends on you having improved your credit score sufficiently to be able to go it alone.


You May not be Notified of Missed Payments

Lenders are supposed to notify the cosigner of a missed payment but this doesn’t always happen. We have heard of a few instances where the primary borrower missed a payment and went into arrears and the cosigner was not notified.


This can have a serious impact on both your credit scores. While you can have the damaged repaired if the lender didn’t inform you when they should, it takes time and effort on your part to make sure it happens.


Your Credit Score is Impacted When Being a Co-Signer

Even though the loan isn’t yours, it will appear on your credit report as it if were. It can count against your debt to income ratio and negatively impact your credit score for a little while.


If you’re planning on getting your own auto loan, a mortgage or other form of finance, consider this point carefully before you sign.


Co-Signers Aren’t Always Necessary

A co-signed loan is a way to access finance if you have bad credit but it isn’t the only way. There are bad credit car loans and other solutions that could work equally well.


If you’re in the market for a new auto loan, come visit the experts as we may be able to offer some alternative solutions.


If not, we can make sure both you and your cosigner are fully in the picture and find a reliable lender that treats you both equally and fairly.


If you're ready for a car loan in Southern Ontario, we'd love to help! simply fill in the form below to get started.

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    Categories: Car News