Who Can Cosign a Car Loan & What Are the Requirements?

A car loan cosigner is an individual who agrees to take on the legal responsibility for a car loan if the primary borrower is unable to make payments. This arrangement often helps a primary borrower secure financing when they might otherwise be denied due to limited credit history, poor credit, or a high debt-to-income (DTI) ratio. Lenders view a cosigner as an additional layer of security, which reduces their risk and can increase the likelihood of loan approval. Beyond just approval, a creditworthy cosigner can also help the primary borrower qualify for more favorable loan terms, such as a lower interest rate, potentially leading to reduced monthly payments over the life of the loan. It is important to distinguish a cosigner from a co-borrower; while a cosigner is responsible for the debt, they do not typically share ownership of the vehicle or appear on the car title. A co-borrower, conversely, shares both financial responsibility and vehicle ownership, with their name appearing on the title.

Cosigner Eligibility

Lenders evaluate several key financial and personal criteria for a cosigner. A primary factor is the cosigner’s credit score, with lenders generally seeking a good to excellent score, often cited as a FICO score of 670 or higher. A strong credit history demonstrates reliability in managing financial obligations, which reassures the lender about loan repayment.

Beyond credit score, a cosigner must demonstrate sufficient income to repay the loan should the primary borrower default. Lenders assess income stability and their debt-to-income (DTI) ratio. The DTI ratio, calculated by dividing monthly debt payments by gross monthly income, measures an individual’s ability to manage monthly payments. Lenders typically prefer a DTI ratio below 50%, as a lower ratio indicates a greater capacity to take on additional debt.

A cosigner must be at least 18 years old, the legal age to enter into a contract. While residency requirements vary, cosigners typically need to be legal residents of the United States. Strong credit, stable income, and a manageable DTI ratio provide lenders with confidence in the cosigner’s ability to fulfill their commitment.

Responsibilities of a Cosigner

When an individual cosigns a car loan, they undertake significant financial and legal obligations. The fundamental responsibility is to repay the entire loan amount, including any associated fees, if the primary borrower fails to make payments. The cosigner is legally bound to the debt, and the lender has the same right to pursue collection efforts against the cosigner as against the primary borrower. This commitment extends to covering late fees or other charges incurred due to missed payments.

The car loan will appear on the credit reports of both the primary borrower and the cosigner. Consequently, if the primary borrower misses payments or defaults on the loan, the cosigner’s credit score will be negatively impacted. Conversely, if timely payments are consistently made, the loan can positively contribute to the credit history of both parties.

In the most severe scenarios of non-payment, lenders can take legal action against the cosigner to recover the unpaid balance. This could involve lawsuits, collection agency involvement, or even wage garnishment if a judgment is obtained. Cosigning also affects the cosigner’s own borrowing capacity, as the cosigned loan adds to their existing debt obligations, which could influence their ability to qualify for future loans, such as a mortgage or another car loan, by increasing their DTI ratio.

Information Needed from a Cosigner

When applying for a car loan, a cosigner must provide personal and financial information for eligibility assessment. This typically includes full legal name, current residential address, and date of birth. A Social Security Number (SSN) is also necessary for the lender to conduct a thorough credit check and verify financial history.

To verify income and employment stability, lenders request documentation such as recent pay stubs, W-2 forms, or tax returns for self-employed individuals. This documentation confirms stated income and evaluates capacity to handle loan payments. Employment information, including employer name, address, and contact details, is also commonly requested to verify status and income consistency.

Furthermore, lenders may ask for bank account information to confirm financial stability and sometimes to set up direct debit for loan payments if necessary. While not always required, other financial statements or asset information may be requested to provide a comprehensive view of the cosigner’s financial standing. This collected information allows the lender to combine the financial profiles of both the primary borrower and the cosigner to make an informed decision on the loan application.

Applying for the Car Loan with a Cosigner

Submitting a car loan application with a cosigner involves several distinct steps after all necessary information has been gathered. Typically, the primary borrower and the cosigner complete a joint loan application form. This form can be submitted through online portals, directly at a dealership, or in person at a bank or credit union.

Once the application is completed, both the primary borrower and the cosigner must provide their signatures. These signatures legally bind both parties to the loan agreement. Notarization of signatures might be necessary in some instances, depending on lender policies. The signed application and all supporting documentation are then submitted to the lender for review.

After submission, the lender reviews the combined financial information of both applicants. This review involves assessing creditworthiness, verifying income, and calculating debt-to-income ratios. The approval timeline varies, ranging from a few hours to several business days, depending on the lender’s processes and application complexity. The lender may also request additional documentation before rendering a final decision.