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Pros and Cons of Co-Signing a Car Loan

Looking to buy a car but having a trouble getting approved for a loan? Or has someone asked you to be their co-signer?
If you are considering asking someone to be your loan co-signer or someone has asked you to co-sign a loan with them, here are several important pros and cons of co-signing a car loan that you should be aware of.
Being a co-signer has its benefits, as long as the primary signer/borrower makes on-time loan payments. Co-signing a car loan for a friend, partner, or a young adult can help that person establish credit, get to school, or get the wheels they need to drive to their job.
However, the risks of co-signing a car loan primarily affect the co-signer. These include limiting your borrowing power, lowering your credit score, and potentially damaging your relationship with the borrower if the borrower defaults on payments.
Credit Union of Southern California (CU SoCal) is one of the leading credit unions in Southern California, providing checking, savings, and loan products with quick pre-approvals, no application or funding fees, and other great member benefits.
Call CU SoCal at 866.287.6225 to schedule a free no-obligation loan consultation, or apply for membership online today!

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How Does Car Co-Signing Work?

A co-signer is another person who also takes full responsibility to pay back a loan. The co-signer is obligated to pay any missed payments and even the full amount of the loan if the borrower doesn’t pay. Having a co-signer on your loan gives your lender additional assurance that the loan will be repaid.
The co-signer should be fully aware that, because the debt is in their name too, they are responsible for paying the monthly loan payments or repaying the entire loan.
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Pros and Cons of Co-signing a Car Loan

There are specific pros and cons to consider before you ask someone to co-sign a loan with you, and before you agree to be a co-signer.


The benefits of having a co-signer and being a loan co-signing can be significant, as long as the loan is paid on-time by the primary signer. These include:
  • Makes Car Buying Easier: For car buyers with no credit history or bad credit, having a co-signer can make it easier to get the loan. Because the co-signer is accepting the responsibility for paying the loan, this lowers the lender’s risk, and can make loan approval easier.
  • Lower Interest Rates: With lower risk to the lender, the primary borrower will usually be offered a lower interest rate on the loan. This could save thousands of dollars over the life of the loan.
  • Helps You Establish or Build Credit: Whether you have good credit or poor credit, making on-times payments on a car loan over the course of several years will improve your credit score and your credit history.
  • Can Improve Credit for Both Parties: The loan will be recorded on the credit reports of both the signer and co-signer. When the signer makes on-time monthly payments bother parties will see their credit scores increase.


Because the primary signer and co-signer share equal responsibility for the loan, this ties two people together for several years, with a great deal of financial obligation. The risks of co-signing a car loan include:
  • Possible Risk to Your Co-Signer's Credit: Because the loan debt appears on bother the signer and co-signer’s your credit reports, the co-signer’s credit score will be affected by any late or missed payments.
  • Co-Signer at Risk for Late Fees, Collection Costs and Legal Action if Loan Is Unpaid: The co-signer is accepting all of the same responsibilities and penalties that a lender can impose, if the loan payments are late or not paid at all.
  • Relationship Risks: If the primary signer fails to pay the loan, be prepared for trouble all around. Carefully consider how you will handle not only the financial part of the loan risk, but the emotional risk if you suddenly find yourself having to pay someone else’s car loan.

Should You Co-sign a Car Loan?

If you, the co-signer, have a high level of confidence in the primary borrower/signer, and this confidence is backed by their solid employment record and income, then cosigning a loan for that person could be a great way to help a young adult, friend, or partner.
If you are the one in need of a new car, carefully consider your income stability before asking a friend or family member to co-sign with you. Do you pay your bills on time? Is your employment steady? Can you afford to make the monthly payments and pay auto insurance for the new car you want?
If you can answer “yes” to these questions, and just need a little extra help getting approved for a car loan, then having a co-signer on your loan could be a good choice for both you and your co-signer.

Why Savvy Consumers Choose CU SoCal

For over 60 years, Credit Union of Southern California has been proudly serving the Southern California community. We provide our Members with checking, savings, personal loans, and other loan products with quick pre-approvals, no application or funding fees, and other unique advantages.
We are known throughout the area for our excellent Member service and we are proud to be serving the community where we work and live.

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Please give us a call today at 866.287.6225 to schedule a no-obligation consultation with one of our loan experts. 
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Credit Union of Southern California (CU SoCal) is a leading financial institution empowering those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County to reach their goals and build strong financial futures. CU SoCal provides access to convenient money management services and offers competitive rates and flexible terms on auto loans, mortgages, and VISA credit cards—turning wishing and waiting into achieving and doing.


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