A cosigner can be a great asset to you when you go to apply for a loan. This is a person that agrees to go on a loan with you to cover the payments in case you default on them. Lenders require cosigners for a lot of young online college students because it provides them with additional security for the loan. You may need a cosigner if you have limited credit because a bank doesn’t know if you will be faithful to your payments or not. Here are a few qualities to keep in mind when looking for a cosigner so that you can apply with the strongest chances possible.
High Credit Score
One of the most important qualities your cosigner should have is a good credit score. A credit score is a reflection of someone’s ability to pay back loans. With a good score in place, the cosigner will look much more appealing to the lenders. Anything above 640 is usually sufficient, but the 700s or above are ideal. You can speak with the place you want to apply through to see if they have any minimums that they look for. Then you just have to find someone that fulfills them.
Good Income
The cosigner needs to be someone that could qualify for a loan on his or her own. Thus the person needs to have a steady source of income that is high enough to support the car payment. The lender will likely look at the person’s debt to income ratio to determine how much money he or she has left over a month to cover a car payment. If the income is good and the ratio is low, you may not have a problem using that person as a cosigner.
Consistent Job History
A lender wants to see that your cosigner will be able to cover your defaulted car payments well into the future. That is why he or she is going to look for a long job history. The cosigner should have at least a year at his or her current job, though some businesses will look at cosigners with shorter histories. The theory is that a long job history with one company represents commitment to a job because of all the time the person has vested in it. If your cosigner has several years under his or her belt with the some company, you should be in good shape.
Close Relation
The ideal cosigner is going to be someone that has a close relation to you, like a parent or a spouse. Lenders look for cosigners like that because they usually have legitimate interest in helping you pay on a loan. If a friend of yours cosigns with you on the loan, he or she may not care if your car payment defaults. That person will take a credit hit from this, but he or she may sacrifice that if he or she doesn’t care about you deeply. A parent or spouse is more likely to cover the money in this case because of the love he or she has for you. That ensures stability for the lender.
Conclusion
A cosigner needs to have a stronger application than you do because you obviously cannot qualify for a loan on your own. If you find someone with better income, better credit, better job history, or all the above, you will have the best chance of getting a loan. Try to get credit on your own if you can because that will prevent other people from suffering when you miss a payment. If you need a little help though, there should be someone in your network that can assist you.