Auto Loans and Co-Borrowers

If you are applying for a car loan and your credit is bad, you may need to have a co-borrower, or co-signer. However, it is important for both you and the co-signer to understand what their role is and what the consequences might be.

With auto loans, both the borrower and any person who co-signs are considered to both be borrowers, with each person equally responsible for paying the loan back on time. All the loan documents must be signed by the co-borrower and his or her name must appear on the contract. If the loan goes into default, any person who signed on it with you will be subject to any collection or legal action. Often, a co-buyer is a person’s wife or husband, and they are needed so their income can be taken into account. A co-signer is usually a relative and it is just that person’s income which must satisfy the guidelines issued by the lender.

If you have bad credit and are considering car loans in Washington State or any other state in the union, make sure that any potential co-signer or buyer understands what they are doing, as well as the possible implications. Of course, if it is a family member who is helping you with your bad credit car loan, defaulting on the loan can cause serious family problems as well. An obvious piece of advise is to make sure you can afford the loan and the amount of the monthly repayments, before asking a friend or family member for help.


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