Co-Signer Car Loans In Canada: Everything You Should Know

If you have had credit issues in the past or have a low credit score, using a cosigner could be enough to help you qualify for an auto loan. We seem to have worked with a number of cosigner car loans recently, which makes it an ideal time to discuss them in a blog post.

Our Milton auto loans team outlines what a cosigner auto loan is and how it can help those with poor credit get finance.

What are Co-Signer Car Loans?

A cosigner is someone who guarantees the loan with you. They are sometimes called guarantors for that very reason.

You sign the loan as the primary borrower and commit to repaying the loan in full. If, for any reason, you default, the cosigner is legally obligated to continue paying the loan in your place.

They don’t have legal title to the car but they are guaranteeing the loan will be repaid.

When is a Co-Signer Needed?

If someone doesn’t have a sufficient credit score for the loan or wouldn’t otherwise qualify for an auto loan, a cosigner can make all the difference.

The cosigner’s credit score is added to the primary borrower and their situation is assessed alongside. If both parties combined would qualify for the loan and both agree, the loan would be approved.

A cosigner auto loan can be a good idea if:

• You Have Bad Credit: If you have had credit issues in the past or are rebuilding your credit and wouldn’t qualify for the loan, a cosigner could help.

• You Have No Credit: If you just turned 18 or just arrived in Canada and don’t have a credit history, using a cosigner could help you access finance.

• Hard to Prove Income If you’re self employed, a contractor or something else and cannot sufficiently prove your income, a cosigner can help you get the auto loan.

How a Co-Signer Car Loans Work

The cosigner auto loan process is very straightforward. Find someone you trust and who trusts you enough to co-sign the loan. Discuss everything with them so they know exactly what they are getting into.

The guarantor will need a good credit score and be able to afford the repayments should you not be able to complete the loan. Some lenders require them to be a homeowner and over 21, but not all do.

You apply for the auto loan as the primary borrower and the cosigner as the guarantor. Both of you will need to prove income, ID, outgoings, affordability and the usual checks for the loan.

The rest of the application is like any other, only both of you will sign the auto loan agreement. You as the main borrower, the other person as the cosigner.

As long as you can keep up repayments, that’s the last the cosigner will ever hear about the loan!

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