Shopping for a car loan for some people may mean jumping through hoops that could include having to ask someone else for help. Although that is not an option that everyone might choose, there are some individuals that have no choice but to ask for help and others that are simply willing to help a good friend.
Before you ask for that help, or offer to provide the help, it is important to know how a car loan affects the credit of a co-signer. There may be positive or negative impacts that could affect their own credit simply by signing a piece of paper without receiving any of the benefits.
Impacts of Being a Credit Co-signer
As a co-signer for an auto loan, put in mind is that you are equally responsible as the car’s driver for the debt incurred. In simpler terms, you’ll be responsible for any payments the borrower cannot make; whether or not they have the insurance required can affect the loan – and basically your credit. How a car loan affects the credit of a co-signer really depends on the borrower and their ability to make the payments. Because of the roller-coaster ride of life in general, it is vital that you know the borrower well before you agree to secure their auto loan for them.
How a car loan affects the credit of a co-signer can have serious impact on the co-signer’s life, even if they never default on that loan. Should the borrower stop making payments or are always late, this will show negatively on your credit unless you take over the payments in an attempt to stop adverse credit action.
Other factors that you should consider are those that affect your ability to get another loan. When applying for a loan, your credit will reflect that you are responsible for so much additional debt even as a co-signer. This means that the credit that would normally be made available to you may not be there.
There are benefits and disadvantages to being a co-signer for a loan, but how a car loan affects the credit of a co-signer will depend on the borrower – always. If payments are made, it is possible to improve the credit of the co-signer, but it is important to watch the loan carefully to evade any negative impact on your credit if things begin to go downhill. Ensure you are able to pick up the pieces should anything go wrong if thinking about co-signing for any loans.