There is Superman, Batman, and many others, and then there is the super-cosigner.
In a credit-centric world, co-signers become modern superheroes for those in need of a loan.
Whether you need a co-signer for a car loan or someone has asked you to co-sign a loan, make sure you are well aware of all the requirements and responsibilities involved in the co-signature process before you proceed. .
What is a cosigner?
Co-signers are individuals who generally have a good credit rating and provide a solution to a borrower’s debt if he or she has been denied a loan application. Lenders ask for a co-signer when they do not want to risk lending money to a certain borrower. However, they can not force you to have one if you can pay the loan on your own.
When you apply for a car loan with a bad credit rating or an irregular credit history, adding a co-signer to your application allows you to improve your credibility. A co-signer can also give you the opportunity to establish a better credit rating or help build a more consistent credit history, as long as all payments are sent on time.
Who can serve me as co-signer?
- A co-signer can be anyone like your relative, a friend or a spouse. However, it is important to make sure that your co-signer can afford to pay the debt if you do not succeed.
The responsibilities of a co-signer
There are always subtle misconceptions about the financial obligations of a co-signer. To clarify this: if you are signing a loan, you are legally obliged to repay the loan in its entirety. If the applicant’s payments are delayed, you may also have to pay late fees or collection costs, which increases the amount.
While some might presume that a co-signer acts as a point of reference for the claimant, the agreement is mostly based on the strict financial obligation to repay the total loan amount, and any additional loans. It’s your responsibility, even if you have no rights to the vehicle.
While you are constrained by debt, a co-signed loan will appear on your credit report as if the loan were yours. That’s why it’s crucial to understand how this can affect your long-term credit rating. If the borrower does not meet his obligations, the lender may use the same method of collection against you, as he would to the borrower.
It is also important to note that if you are planning to apply for a loan for yourself in the near future, you may not want to co-sign it now. Co-signing will increase your apparent debt and could potentially affect your ability to get approval.
Whether you need a co-signer for a car loan, or have been asked to sign one, make sure you understand all the requirements and responsibilities involved. Now everyone is lucky to be able to drive their new car thanks to the co-signers. Cosign the world, a car loan at a time!