How to Get an Auto Loan When No One is ready to co-sign for you
Afraid you need a co-signer for your next car? If no one is ready to co-sign for you, it is because it has several financial risks. For a co-signer, the act of helping you out with your auto loan can put a massive financial strain. If you do not have a co-signer, simply change your game plan. Learn how you can avail an auto loan without a co-signer.
Auto loan approval speeds up when you have a co-signer. You might have suffered from bad credit and the best solution would be to get a cosigner on board. Ideally, a co-signer is someone who agrees to repay the auto loan amount in case the borrower fails to make regular payments. Co-signing is a generous act of helping a family member or a friend in need. But more often than not, the risks involved with co-signing an auto loan are massive. Due to the numerous financial risks, you may be left in a situation with no co-signer.
What are the Risks of Co-Signing an Auto Loan?
1. Directly Liable to Make Payments
In the worst-case scenario, if you are unable to make payments, the co-signer will become directly liable to pay them. The lender has the right to sue the co-signer, who has agreed to repay the loan in the past. Although the co-signer has not taken an auto loan, he has helped the borrower attain auto loan approval. Therefore, he can be held responsible for making payments in case the borrower avoids making them.
2. Debt to Income Ratio Disruption
When a co-signer comes on board, his total debt increases as compared to the gross monthly income. The person co-signing for you would always think about his/her future financial requirements. If he co-signs for an auto loan, he might be denied for a loan in the future because there is already a lot of debt under his name. When someone co-signs for you, it can disrupt their future financial planning. And so, they avoid co-signing for a loan.
3. Co-signing Makes Relationships Bleak
A co-signer will be ready to risk their credit score only if they are a close friend or a family member. In most cases, when you miss out on payments, it becomes your co-signer’s duty to bring you into the lawsuit. Most likely, your friend or relative may even have to sue you and that can strain your friendships or family ties.
If Co-Signing is a Bad Idea, then how do you obtain an Auto Loan?
If you are unable to find a co-signer, do not worry. There is hope. Get back to the drawing board and change your game plan. Focus on the following things for easy approval:
1. Increase the Amount of Down Payment
When you apply for an auto loan, make sure you are making a big down payment that reduces the amount of the car loan. Ideally, 20% or more of a down payment is a good amount to pay upfront for auto loans without a co-signer.
2. Work on Building Stellar Credit
You require a co-signer in the first place because of a bad credit history. Work on increasing your credit score by paying off past debt, clearing credit card balances and paying your auto loan on time.
3. Apply for No Co-Signer Auto Loans
Last but not least, consider applying for no co-signer auto loans. There are many online auto financing companies that offer auto loan approval without the need to co-sign. Interest rates may be a tad higher but they will compensate for the time and effort take to convince someone to help you out. You can always negotiate interest rates with the lender and seek a better deal by manifesting your current monthly income.
Auto loans without a co-signer are still a possibility. All you need to do is change your game plan, take the right steps and you can buy a car easily.
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