Cosigner Requirement For First-Time Auto Loans – A Myth Or a Reality?
First-time car buyers are usually young people with very limited credit history or no credit history at all. While having no credit or little credit is better than having bad credit, obtaining an auto loan may be quite challenging. Most first-time car buyers are under impression that a trustworthy cosigner with a long-established positive credit may help them to get approved and to benefit from better loan terms. Such impression is often dictated by auto dealers, who automatically classify auto loan applications made by people with limited credit histories as needing a cosigner in order to get approved, while often such applications may be approved without one.
Using a Cosigner Has Major Benefits
Lenders treat cosigners as an added layer of security. It does not mean, however, that they would approve any loan applications that have a signature of a co-borrower with impeccable credit. Most people with limited or no credit histories do not realize that using a cosigner is not a panacea, as lenders access their credit, income, and repayment ability first. If they do not see a primary borrower a right fit for a loan, they would reject a loan application no matter how great a cosigner may be. No matter whether you intend to use a cosigner or not, always make sure that your income, employment status, and vehicle price satisfy the requirements set by lenders. If you feel that you meet all loan criteria, then using a cosigner may serve to your benefit. As cosigned loans pose less risk to lenders, especially on secured loans, you may be able to land loan terms that are available to prime or near-prime borrowers with the help of creditworthy cosigner. In addition, lenders may waive the down payment requirement, allowing you to drive the car you want without out-of-pocket expense.
Going without Cosigner Is Challenging, Yet Possible
What will happen if you do not have a cosigner? Does it mean you are out of options? Of course, not! Many people with no credit, limited credit, and even very bad credit are approved on their own every day. There are lenders who would gladly approve first-time car buyers. Some would even allow you to buy a car with no money down. The most common drawback of going on your own without established credit is less favorable loan terms. Many lenders treat people with no credit as an unpredictable risk and assign higher interest rates and limiting terms to auto loans for first-time car buyers. There is, however, an easy way to get better rates on your auto loan – put a down payment on a car.
Typically, the more money you put down, the better terms you would get. Lenders know that people who invest significant amounts towards a vehicle purchase are less likely to default on an auto loan. So, if you want to save some money on the cost of borrowing, you should be prepared to spend some money upfront. Making a down payment makes perfect sense, as it allows getting a loan with better lenders, ensures a lower interest rate, and gives you more options in selecting vehicles.
If you do not have a sufficient amount of money to put upfront, and have nobody to use as a cosigner, do not get despaired. There are options available for people just like you. A vast network of online auto lenders would allow you to get matched with a lender who would get you the terms you need and help you to get behind the wheel of your dream car in no time.