First Car Guide for First Time Car Buyers

Who needs a co-signer for a car loan?

New car buyers are often surprised at being turned down for a car loan because they have no credit history. Having no credit has about the same effect as having bad credit.

It's a familiar "catch-22" situation in that you can't get a loan to establish credit without already having credit. So what is the answer?

A co-signer does not share ownership of your vehicle. If you pay off your loan on time and without problems, the co-signer has no further role, rights,  or responsiblity. Their job is finished.

You should take care in selecting a co-signer. Since approval of your loan will depend on their credit worthiness, the person should have a strong and healthy credit history, a steady source of income, and not have excessive debt. For most new car buyers, this will probably be a close family member.

If you have already shown a history of financial irresponsibility, you may have difficulty finding someone who is willing to assume responsibility for your new obligations.

If you can't find someone who will co-sign for you, you have few other options. You may have to work out your transporation needs another way while you save enough money to get started with an inexpensive used car, while building your credit history so that you won't need a co-signer the next time.

Getting a co-signer is a great way to start building your own credit history. If you make your payments on time, don't skip payments, and don't default on your loan, you'll be in great shape for your next loan — without a co-signer.

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