Cosigner for a Car: What Is a Cosigner?

Kelly Boyer Sagert

Updated November 11, 2021

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

If you’ve picked out a car to buy and applied for a loan but had your application rejected, the lender might suggest that having an auto loan cosigner could help you get approved. You might be wondering, though, how much can a cosigner for a car loan really help? If you have little credit history or a low credit score and a qualified cosigner, the answer is a good amount — and it could also help you snag a better interest rate on your loan.Still, there are pros and cons of getting a cosigner for a car to consider, which we cover along with exactly how cosigning a car loan works.

What Is Cosigning?

Cosigning is a process where another person applies for your loan with you, typically to improve your chances of getting loan approval. This person is agreeing to also be responsible for your loan, serving as a financial guarantor. If you don’t make your payments, they’re legally obligated to do so. When you have an auto loan cosigner, the lender will look at their credit scores, income, debts and so forth to see if they can afford the monthly car payment. So, when you have a qualified cosigner for car loans, this makes it much more likely that you’ll get your application approved.

How Does Using a Cosigner Work?

In this section, we’ll get more into the nuts and bolts of the cosigning process. At a high level, you would find a qualified borrower who would agree to apply for the loan with you and guarantee payment.

Who Can Cosign a Car Loan?

Friends, family members and anyone else who has a relationship with you can serve as a cosigner. A successful cosigner needs to be someone who has a good credit score, consistent income and debt that’s not too high relative to the income they earn.

When to Cosign an Auto Loan

If you qualify for a loan on your own, a lender can’t require you to get a cosigner. A cosigner is needed, though, if a lender won’t approve the loan based on your own credit record and income.

When Is It Best to Get a Cosigner for a Car?

A cosigner can be needed if:

You have a limited credit history
You have a low credit score
Your debt-to-income ratio (the amount of debt you have in relation to your income) is too high
Your employment history is too short or unstable
You’re otherwise considered to be a high-risk borrower

Can Your Use a Cosigner When Refinancing an Auto Loan?

Just like when you’re buying a vehicle, cosigning a refinanced auto loan is an option. Again, this will be someone whose credit, income and so forth can help you to get approved for refinancing.

What Rights Does a Cosigner Have?

A cosigner has the right to request a cosigner release if the main borrower falls behind on payments. However, both the primary borrower and the lender would have to approve the cosigner’s removal from the loan.Even though the cosigner agrees to repay the debt if the primary borrower doesn’t, they do not have any rights to the car being financed. That belongs to the main borrower, with the cosigner simply serving as a financial guarantor.

Pros & Cons of Cosigning an Auto Loan

As with just about any financial transaction, there are pros and cons to having a cosigner for a car, which we outline in the table below.

The Cosigning Process

In order to get a cosigner, you’ll first need to brainstorm who might make a good auto loan cosigner. This will generally be someone with good credit, a decent income and a relatively small debt loan — and who might be willing to do this for you. Because cosigning a car loan is a big responsibility, it makes sense to prepare for when you’ll ask that person. Have information available about the vehicle, the lender, the loan terms and so forth. Also be ready to share how you’ll be able to make payments on time. Perhaps you’ve had credit challenges in the past that are still making it difficult for you to get a loan on your own, but you’re now following a budget and have some money saved. Share that information with the potential cosigner. If that person agrees to cosign for a car, then they would apply for the car loan with you, sharing their personal information with the lender and agreeing to have their credit scores checked. If the loan gets approved, they’d sign the paperwork.

Can a Cosigner Be Removed From an Auto Loan?

The short answer is yes, with three different methods of removing a cosigner from a loan available:

Paying off the loan: If this is possible, then you’ll not only remove the cosigner from the loan but you’ll get rid of a monthly payment. Make sure there are no fees for paying early — or, if there are, that the payoff still has enough value to move forward.
Investigating a cosigner release: Check your car note or talk to your lender to see if there is a clause in your loan papers to release a cosigner if certain conditions have been met. If there isn't, ask the lender what they would need to release the cosigner; they may agree if they feel confident that you can make the payments on your own.
Refinancing the car loan into your name only: If you had financial or credit-related reasons for getting a cosigner and your situation has since improved, then you may be able to refinance the car into just your name. Refinancing for borrowers with a bad credit score can also sometimes be an option.

Although the third option is often the most practical, there are things to consider when refinancing a car loan.For one, it can affect your credit score (though the effects are usually small and relatively short-lived). You’ll also want to take some time when shopping for a car loan for your refinance, making sure to compare the interest rates, terms, payments and fees offered by various lenders. Ideally, you could get an interest rate that’s better than your current one as well as a more attractive payment (with the new loan’s term playing a key role in what that new payment would be).

The Takeaway

Getting a cosigner can sometimes make the difference between a loan application getting approved or turned down, and it can often save the borrower money. Reasons why a cosigner is typically needed include when the primary borrower has credit-related issues or doesn’t have enough income.At some point, however, a borrower may decide to refinance the loan to get the cosigner’s name off of the application and, ideally, also secure a better interest rate. To get information about multiple lenders and their car refinancing programs, you can fill out just one simple auto loan refinancing application at Lantern by SoFi.

Photo credit: iStock/fizkesThe tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.SOLC1021233

About the Author

Kelly Boyer Sagert

Kelly Boyer Sagert is an Emmy Award-nominated writer with decades of professional writing experience. As she was getting her writing career off the ground, she spent several years working at a savings and loan institution, working in the following departments: savings, loans, IRAs, and auditing. She has published thousands of pieces online and in print.

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