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Bottom Line Up Front

  • If you don't have an established credit history, a co-signer may help you secure an auto loan.
  • You could improve your odds of loan approval with a co-signer—and possibly could also get a better interest rate.
  • Make sure your co-signer is someone you know and trust, with a strong credit history.
  • Alternatives to having a co-signer can include improving your credit score or putting down a larger down payment.

Time to Read

4 minutes

January 12, 2024

Getting ready to buy your first car? Congratulations! You’ll soon enjoy the pride that comes with owning your own set of wheels. But if you don’t have enough cash to buy a car, getting an auto loan can be tricky—especially if you don’t have an established credit history. If you’re having trouble securing an auto loan, a co-signer could be the difference-maker.

What is a co-signer?

A co-signer is someone who agrees to repay a loan if you, the primary borrower, are unable to do so. This person typically agrees to co-sign the loan out of their own goodwill, as a way to vouch for your trustworthiness. The lender looks at both their credit history and income, as well as yours. Often, having a co-signer with good credit improves your chances of getting approved for an auto loan.

Why do you need a co-signer?

Applicants who don’t have a well-established credit history often have trouble getting loans, whether it’s for a vehicle or for something else. Finding a co-signer is a great option if you’re just starting to manage your finances and need a car—or if you have low or no income. When lenders see a co-signer with good credit history and good income, they’re more likely to approve a loan application.

Getting a co-signer for an auto loan could also come with an extra perk: lower interest rates. If you’re able to find a co-signer with great credit, you could get a better interest rate—and perhaps pay less in interest over the life of your loan, saving you money.

Who should you ask to be a co-signer?

A co-signer should be someone you trust. If you can’t make your payments, your co-signer needs to be able to shoulder that burden. Typically, your best option for a co-signer is an immediate or extended family member; however, it can be anyone you have a close personal relationship with. Keep these criteria in mind when looking for a co-signer for your auto loan:

  • A strong credit score and clean credit history
  • The ability to reasonably afford payments if you can’t
  • A personal relationship rooted in mutual trust

Not every co-signer is a good co-signer! For example, if their credit score is low or they have a history of missed payments, your lender might still deny the loan application. The key to a great co-signer is someone whose creditworthiness vouches for your own lack of credit history.

What are some alternatives to co-signers?

Having a co-signer isn’t a requirement to secure an auto loan. If you have good credit history and a steady income, you may be able to get approved for a loan yourself. Some alternative options to co-signers include:

  • Improve your credit score. One of the best ways to obtain an auto loan without a co-signer is to focus on improving your credit score. A higher credit score correlates with more attractive interest rates.
  • Research credit unions. Many credit unions—including Navy Federal Credit Union—work with individuals who are establishing credit. Credit unions have been reported to offer better rates and lower fees, on average.
  • Save for a bigger down payment. If you’re unable to find an auto loan without a co-signer—or you’re only approved for loans with a high-interest rate—consider putting off the purchase of your car till you can save for a down payment. Some lenders are more flexible with financing auto loans if you put down a larger down payment.  

Apply for an auto loan with confidence

Applying for an auto loan can seem intimidating, especially if you don’t have established credit history. Getting a co-signer can make the loan process a lot easier and could save you money on interest. This little helping hand could be exactly what you need to start building your own strong history of creditworthiness!

If you’re getting ready to buy a car, check out Navy Federal Credit Union’s Car Buying Center for more resources and information to help you along the way.

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This content is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.