Do i need a co-signer for my first car loan?



When you get your very first car loan, it can be helpful to have a co-signer. However, this may not always be necessary depending on the lender you are financing through. Here’s how co-signers work, how they help, and lenders who may not require you to have one.

First car buyers and co-signers

If you’re on your way to getting your first auto loan, it can be a lot to deal with. And one of the toughest hurdles you may have to overcome is your credit score.

Many first-time car buyers have less than perfect credit – not because of past missed payments on other loans, but simply because of a lack of credit history. Borrowers who don’t have multiple accounts or years of on-time payments aren’t likely to have a spectacular credit score just yet because they haven’t proven their ability to repay the credit. Without a history of good loan management, a lender may be reluctant to approve you for vehicle financing.

Since new borrowers tend to have lower credit scores, many auto lenders require that they have a co-signer to qualify for a car loan. A co-signer is someone who signs the auto loan with you and lends you their good credit rating to help you meet the lender’s requirements. In addition, the co-signer agrees to repay the car loan if you are unable to do so. Since there are two people responsible for the loan, there is less chance of things going wrong, so having a co-signer increases your chances of getting approved.

It is quite possible that an auto lender will ask you to have a co-signer on your first auto loan if your credit score is not up to par. However, that doesn’t mean that every lender from now on will have the same requirements or ask you to bring in a co-signer.

No credit? Some lenders to consider

Depending on your situation, you may have several options to explore if you do not have a co-signer.

Lenders who often help new borrowers typically include:

  • Credit unions – Credit unions are often the recommended first stop for a brand new borrower looking for a car loan. If you are a member of a credit union and your accounts are in good standing, they may be willing to work with your Restricted Credit Profile. It’s not a guarantee that they can approve you without a good credit score, but these institutions are member-owned and tend to be more lenient on credit score requirements, so it’s worth it. Remember, you need to meet their other requirements, such as income and work history requirements, and you might need a down payment.
  • Special funding – Special financing is an umbrella term for auto loans for borrowers with bad credit. Subprime lenders with special finance dealers often have first-time car purchase programs that may not require you to have a co-signer to qualify. These lenders look at more than your credit score, using factors such as your income, work history, debt-to-income ratio, life stability, and your down payment amount to qualify for financing. For borrowers with poor credit who do not have the help of a co-signer, a subprime lender may be the ticket for a car loan.

Although it seems like you have only two main options, there are plenty of credit unions. According to Statista, there were 5,298 different credit unions in the United States in 2020. The problem with these institutions is that you usually have to meet certain criteria to become a member, such as living in the area, having student status, or be a veteran. Also, the longer you have been a member of your personal credit union, the higher your chances of getting approved.

There are also many risk lenders. Special financing dealers are all over the country, but not always so easy to locate. Many dealerships don’t advertise their lending partners, but if you think a subprime lender is your next step, we want to help.

Find a Special Financing Dealer

TO Auto Express Credit, we have developed a network of dealers from coast to coast who are able to help borrowers with credit problems. If you need a dealer relationship, let us do the hard work of finding one for you.

Fill out our free auto loan application form and we will search for a dealer in your area free of charge and without obligation.


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