If you’re buying a car for the first time and are having a hard time getting approved for an auto loan, adding a cosigner for a car loan can make a meaningful difference. A cosigner can improve your chances of getting approved and can sometimes even help you qualify for a lower interest rate.
But cosigning is a big responsibility for both you and the cosigner. This guide breaks down what a cosigner does for a car, how much a cosigner helps on auto loans, and what to consider before applying.
Key Takeaways:
- A cosigner can improve auto loan approval and help you qualify for better rates.
- Most cosigners need good credit and reliable income to make a difference.
- Cosigners share loan responsibility but don’t automatically own the car.
- On-time payments can help build credit for borrowers.
- Credit unions often offer more flexible options for loans with cosigners.
What is a cosigner, and how does cosigning for a car work?
A cosigner for a car loan is someone who applies for the loan with you and agrees to share legal responsibility for repaying it. In practice, this means that if you miss payments or default on the loan, the lender can require the cosigner to make the payments instead.
This reduces the risk for your lender, which is why having a cosigner can help you get approved for a lower interest rate. If you’re having trouble getting approved for an auto loan on your own, having a strong cosigner by your side can really help your chances.
Here’s how the cosigning process typically works:
- You apply for the auto loan. When applying for a car loan, you indicate that you’ll be applying with a cosigner.
- The cosigner submits their financial information. The lender reviews the cosigner’s credit score, credit history, income, and debt just as they would for the primary borrower.
- The lender evaluates the combined application. By adding a cosigner with strong credit, the lender sees less risk, which can improve approval chances and loan terms.
- Both parties sign the loan agreement. Once approved, both you and the cosigner sign the loan and share responsibility until the loan is paid off.
Because a cosigner takes on real financial risk, it’s important that everyone involved understands what cosigning means before moving forward.
Related: Will An Auto Loan Improve My Credit Score?
Do you need a cosigner?
No, not necessarily. You typically don’t need a cosigner for an auto loan if you can qualify on your own. If your auto loan application was turned down, however, or if your lender told you you don’t qualify for a loan, you may want to consider asking someone to cosign.
There are many reasons people often have trouble getting approved for a loan, but some of the most common ones are:
- A low credit score and/or bad credit history
- No established credit
- Not enough income
- A high debt-to-income ratio
- Recent job changes or self-employment
A cosigner helps reduce the lender’s risk by backing the loan with their financial profile.
What does a cosigner do for a car loan?
A cosigner agrees to take equal legal responsibility for the auto loan. That means:
- The cosigner signs the loan with you
- The loan appears on both credit reports
- If payments are missed, the cosigner is responsible for paying
From the lender’s perspective, this added security often makes approval easier and terms more favorable.
Who can cosign a car loan? Does a cosigner have to have good credit?
Asking someone to cosign your loan means asking them to take on financial risk, so the ideal cosigner is someone who knows you well and believes in you and your ability to make your loan payments on time. Parents commonly cosign for their children, but a cosigner for a car loan doesn’t have to be a family member.
The more financially stable your cosigner is, the more they can help your application. Most lenders look for cosigners with:
- A good credit score
- A positive credit history
- Steady income
In most cases, a cosigner does need to have good credit. Lenders rely on the cosigner’s credit profile to reduce risk, especially when the primary borrower has limited or challenged credit.
If a cosigner has poor credit or unstable income, they may not improve the loan terms. In some cases, they could even hurt the application. That’s why it’s important to choose a cosigner who is financially prepared to take on the responsibility.
How much does a cosigner help on auto loans?
If your cosigner has strong credit and a steady income, adding them to your application will definitely strengthen it. Just how much really depends on a variety of factors, including:
- The amount and terms of your auto loan
- Who your lender is
- Your cosigner’s financial situation and your own
In many cases, a cosigner can:
- Turn a denial into an approval
- Reduce interest rates
- Improve loan terms
The best way to figure out how much of a difference your cosigner will make is to talk to your lender about your options. At Valley Credit Union, we are often able to offer better loan options (including a lower interest rate) to people who have a cosigner on their application.
Cosigner for a Car Loan in Oregon
If you’re applying for an auto loan in Oregon, local lending practices and state-level consumer protections can work in your favor, especially when working with a credit union.
Oregon borrowers often turn to credit unions because they:
- Offer more flexible underwriting than large banks
- Work closely with first-time buyers and members using cosigners
- Provide clearer guidance around cosigner responsibilities
For Oregonians wondering how much a cosigner helps on auto loans, local credit unions often take a more personalized approach, reviewing the full financial picture instead of relying only on credit score cutoffs.
Additional Cosigner Car Loan Questions
Can a cosigner help me get a lower car loan rate?
Often, yes. A cosigner with strong credit can help reduce lender risk, which may lead to better rates.
Can a cosigner be removed from a car loan?
Some lenders allow cosigner release after a set number of on-time payments, but policies vary. Be sure to check with your lender before signing a loan.
Can you get a car loan with bad credit if you have a cosigner?
Yes, having a cosigner can make it possible to get a car loan even if you have bad credit. A cosigner with strong credit and stable income helps reduce the lender’s risk, which can improve approval odds and sometimes lead to better loan terms than you’d qualify for on your own.
Does having a cosigner help your credit?
It can. If the loan is reported to credit bureaus and payments are made on time, the positive payment history may help build or improve your credit over time. However, missed payments can negatively affect both you and the cosigner, since the loan appears on both credit reports.
Does a cosigner own the car?
Not necessarily. A cosigner is responsible for the loan, but ownership depends on whose name is on the vehicle title. In many cases, only the primary borrower is listed on the title, meaning the cosigner does not own the car.
Can a cosigner take your car?
Generally, no. A cosigner does not automatically have the right to take the vehicle just because their name is on the loan. However, if the loan goes into default, the lender may repossess the car, regardless of who is driving it.
Can a cosigner take over a car loan?
A cosigner typically cannot take over the loan without the lender’s approval. In some situations, the lender may allow the cosigner to refinance the loan in their own name, but this requires a new application and approval process.
Yes. Refinancing with a cosigner can be a smart option if you’re trying to lower your interest rate or improve loan terms. The lender will review both borrowers’ credit and income when evaluating the refinance application.
How do you get a car loan without a cosigner?
If you want to qualify without a cosigner, some steps that may help include improving your credit score, paying down existing debt, increasing your income, or choosing a lower-priced vehicle. Working with a local lender like Valley Credit Union can also help, since credit unions usually consider more than just your credit score, unlike big banks.
Have you considered a credit union auto loan?
Credit unions are often able to offer better loan options than banks. At Valley Credit Union, we offer our members some pretty amazing benefits, and we frequently lend to first-time car buyers and people with cosigners. We also offer free rate quotes!
Call us today and experience the difference for yourself. You can also send us a message, stop by our office, or apply online to get started.
About the Author
Justin Roberts, Vice President of Lending
Justin Roberts is our Vice President of Lending and has been in the financial industry for over 18 years. He is an Oregon State University Graduate and has just completed Western CUNA Management School. When he is not focused on helping the members at Valley, you will find him coaching his two sons and volunteering his time to help develop the youth in our communities through sports.