Many Canadians opt for guaranteed auto loan or finance options of other types to buy a car. Today, auto finance loans have become a common choice among people.
However, getting approved for a car loan is not as easy as it seems to be. There are eligibility requirements to be fulfilled. Understanding what it takes to get approval for a car loan, and where to find the best lender who offers the most competitive rates for guaranteed auto loans is important.
Typically, car finance applicants or borrowers need to show their financial ability to repay loans on time. If they have a good source of income, earn a sufficient amount, manage a substantial down payment, and also meet other criteria of lender especially those related to credit score, it could be relatively easy to get approval for the best car finance loan. Notably, there is one more requirement – a cosigner.
What is a Cosigner in a Car Loan?
A cosigner is an individual who agrees to take the responsibility of loan payment if the primary borrower fails to do the same. In other words, the cosigner is a guarantor too.
When a borrower’s credit score is less than perfect, the cosigner is generally required. Including a creditworthy cosigner in your loan application will make things less risky for a lender and therefore, your approval chances for an auto loan cosigner increase.
Why Would You Need a Cosigner?
- You have limited or poor credit history which puts you in the category of a high-risk borrower which poses greater risks to the lender. Auto finance companies in Canada may ask you to bring in a cosigner with a strong credit background.
- Lenders determine your ability to repay a loan on time based on your income as well. If your income is not good enough to meet the loan requirements, having a cosigner may be necessary, which will increase your car loan approval chances.
- Students or young adults with no established credit history are considered riskier and therefore, they can find a person with good credit for cosigning a car loan. A guardian or parent can mitigate the risk by cosigning.
- Often, self-employed individuals whose income varies from month to month may need to strengthen their application with a cosigner who has a steady source of income and an excellent credit score.
- Recent immigrants in Canada might find it difficult to obtain credit due to insufficient credit history in Canada. A cosigner with a good credit history in Canada can help you to secure an auto finance loan.
- With a cosigner, there are enough chances that you will qualify for car loans in Canada which offer low interest car loan rates and can also increase the amount of a loan.
Apart from cosigners, lenders may have their own set of eligibility requirements and documentation. Besides, finding the right lender is also an important task. Always seek expert advice for better options.