How a Cosigner Can Help Your Auto Loan

Some consumers prefer to find a cosigner for their car loan for a number of reasons. It is not always the case that people with bad credit use cosigners: a number of other situations can also require a cosigner. To understand how a cosigner can be beneficial, it is important to keep in mind what it means to be a cosigner. Then the need for such a person for car loans can be elucidated.


You can see a cosigner as a person who pays your loans for you if you can’t. This doesn’t mean that you have someone sign the paper for you just to make them pay for it. It is a bit different and more important legally speaking: a cosigner is the person who the bank comes to when you have not made your payments. That’s why it is very important that whoever agrees to become your cosigner trusts you.


An example of a good cosigner for your car loan then would probably be someone close to you who has a good credit score and is willing to help you. This could be a parent, a spouse or a friend. Keep in mind that if you find yourself unable to pay your loans, the banks can ask you cosigner to do so, which may impact your relationship with that person.


People who have bad credit and no credit are among the people who may choose to use a cosigner. If you have bad credit, then a cosigner can be a way to get a better deal on your car loans. If you have never had a loan in your life, you probably have no way of getting a credit score unless you have a cosigner. Then the car loan goes on both of your credit scores, which allows you to build credit and them to help you.
A cosigner can be a good option for many sorts of people. Everyone’s situation in life is different, so remember how a cosigner can help before deciding whether you should ask someone to be that person on your next auto loan.


Car Loan Basics for First-Time Buyers

Car loans for first car purchases can be intimidating. For most people this is the first major purchase in their lives and the first time they have applied for a sizeable loan.  Many first-time car buyers will be working with a used car dealer that can offer both quality vehicles and in-house financing. Understanding a few key ideas like down payment, APR and term may help make the process less intimidating.

The down payment is the portion of the purchase price that is paid up front and not included in the financing. While it is possible to obtain financing without a down payment, many lenders like to see some level of initial investment from the buyer. A down payment can affect a lenders decision to lend or not to lend, as well as what interest rate they are willing to give to the buyer.  Of course, since the down payment lowers the amount financed it also lowers the monthly payment, making the note easier to handle every month.

The annual percentage rate, or APR, is the fee a buyer pays to the lender for loaning the money to buy the vehicle. It is calculated over time based on the term. Many things can affect the APR on a loan, credit score, vehicle age, term and more.  Low APR’s mean cheaper loans, but sometimes a buyer may have to accept a lightly higher rate in order to get the vehicle they need and to establish or repair good credit history.

The word “term” refers to the number of months required to repay the loan. This is negotiated in advance and total interest and monthly payments are calculated based on this number. Some car loans may have terms as short as 6 or 12 months, while others may go as high as 72 or even 84 months.

A long-term loan will cost the buyer more than a short-term loan for the same amount. Short-term loans cost less and end sooner, but also make the monthly payments higher, putting potential financial strain on the buyer. A buyer’s best bet is find a balance point somewhere in the middle when possible.