Do I Need a Co-Signer For a Car Loan? It Depends

Do I Need a Co-Signer For a Car Loan? It Depends

Posted on April 6, 2022

Bad credit car loans and co-signers often go together, but do they have to? Do you need a cosigner if you have less than perfect credit? Our Kitchener car loan team finds out!

People get into bad credit for all kinds of reasons, often through no fault of their own. While the credit landscape is much more understanding than before, you do have to work harder if you have bad credit.

But do you need a cosigner?

No, you don’t!

Co-signers and Kitchener bad credit car loans

A co-signer is someone who guarantees the loan on your behalf. They guarantee to the lender that they will continue paying your car loan if you cannot.

Should you default for any reason, the co-signer will need to be in a position to either settle the loan or take on the monthly payments.

It’s a legally binding agreement so you should choose your co-signer with care!

The benefits of using a co-signer

You absolutely do not have to use a co-signer, but there are benefits of using one.

Higher chances of acceptance – A co-signer can be the difference between being accepted for a car loan and not. If your credit is borderline for the amount you want to borrow, the co-signer can make all the difference.

Lower interest rates – The addition of a co-signer onto a car loan can mean lower interest rates. Their credit score is taken into account during the loan and their good score can benefit both of you.

The downsides of using a co-signer

There are also downsides to using a co-signer on a bad credit car loan in Kitchener.

Mixing family and finance – You know the sayings around mixing friends and family and money? It’s true. If you can repay the loan, you should be fine. If you default, expect the relationship to take a hit as well as your credit score.

Legal obligation – Tying a friend or loved one into a legal obligation isn’t always a good move. While everyone hopes they will never need to take over, life happens and we never quite know what’s around the corner. Not everyone will be comfortable joining a friend or family into a legal contract.

Alternatives to using a co-signer for bad credit car loans

Co-signers are one way to access bad credit car loans but they aren’t the only way. You can also borrow less, put down a larger down payment, buy used instead of new or lease.

All of these will get you a car but they don’t require you to find a co-signer. Some are more practical than others of course!

If you have the luxury of time, a larger down payment can also clinch the deal. If you’re planning to buy new, buying a one or two year old car can offer the same levels of comfort and technology for a lot less.

Leasing is also an option but comes with its own complications.

Whatever you decide to do, we can help.

When you’re ready for a car loan, get in touch with the Kitchener auto loan experts at Northway Ford for great deals on auto finance.

Be sure to connect with us on Facebook, Twitter, Instagram, or LinkedIn to stay up to date on our latest great articles!