Should my girlfriend cosign on my car loan? Or, how do I get a car loan?

March 18, 2006 5:59 AM

How do I get a car loan? What are the mechanics of cosigning?

I have pretty miserable credit (HR, <500 on my FICO). On the other hand, i've now been in a cushy job for about a year and a half now, and I'm doing really well financially, such that my debt to income ratio is about 6% and i'm well over six figures in income. So here's my question. I know loan qualifiers won't approve me solo, since my credit is so bad. What are the mechanics of a cosigner? My girlfriend has great credit and is willing to help me out, but will having me on the loan hurt or help? She has median income in the 50-75k a year range, but she already has a loan. Also, how much upfront will influence a lender's decision? For instance, if I put 0k, 3k, 5k, 10k down, will any of those make a difference in the ability to finance me on my own or with her?

posted by arimathea to Work & Money (9 answers total)

I definitely think you'd have an easier time if you put a serious amount up front. Say you're buying a 20k car. Putting 10k down would make it a much lower risk for a bank to approve, and if you get a sucky rate due to your credit score, then you'll be glad you only have to pay off a small amount at high interest (if you really want to help out your credit, pay $1,000/month until it is paid off in a short time).
posted by mathowie at 7:35 AM on March 18, 2006

most places wont accept a cosigner that isnt a blood relative or husband/wife.
posted by trishthedish at 7:59 AM on March 18, 2006

Cosigning with anybody can be problematic. With someone who you're not related to by blood or marriage (if it's even possible as trishthedish indicated) is potential for disaster. if you've got a low debt ratio, save up a bit and pay cash for a used car (not a total beater), something more than 4 years old after the bulk of the depreciation has come out of the thing. Also, if you've got a decent relationship with a bank (or better yet, credit union) talk to them first. If you finance at a car lot, they'll use that FICO score to rape you with a super-high interest rate (ask me how I know).
posted by friarjohn at 8:15 AM on March 18, 2006

I forgot to add, drive the used car until you can save up for a new one and pay cash. Save all that interest. FICO be damned.
posted by friarjohn at 8:16 AM on March 18, 2006

If your credit is below 700, it indicates a serious financial problem. You shouldn't ask anyone to cosign with you.
posted by The Jesse Helms at 8:59 AM on March 18, 2006

Best answer: You might get some advice/tips here.
posted by birdherder at 10:50 AM on March 18, 2006

Why would anyone have a six-figure income, 6% of it as debt, and be apparently about to buy an expensive car (the sort of car that you might make a $10k down payment on).

You're ever-so-obviously living beyond your means if you need a loan for the car with that kind of income. Get a cheaper car, or just wait a few years to get the one you want. Maybe you could even -- horrors! -- save up for the car.

Pay off your debts. Quit letting them hang over you when you're earning perfectly good money.
posted by reklaw at 12:36 PM on March 18, 2006

Best answer: I "co-signed" a loan for a close friend. I call it "co-signing," but the paperwork looks like I bought the car (with my friend's name added to the title/registration/loan docs). My friend's credit situation was irrelevant - only my credit was considered. The only problem we've had is that the DMV sends all the paperwork to my address (license renewal, parking tickets, etc), but this has been only a minor inconvenience. I'd be worried about being in my friend's shoes though - I didn't put up any of my own money (just my credit), but since my name is on the registration and loan docs, it looks like I own the car. I suppose I could have it towed and sold without my friend being able to do much besides taking me to court.

And, yes, the larger the down-payment, the better the loan looks to the lender. The lender's loan is secured by the vehicle - if you don't pay, they take your car, whether you put 5% down or 50% down. It's much easier for them to sell your car and recover all of their money if the loan-to-value of the car is only 50% (i.e. you made a 50% down-payment). Most sub-prime lenders will give a loan to anyone provided the down-payment is large enough. I wouldn't expect much improvement in rates, however, especially going through a dealer.
posted by mullacc at 12:43 PM on March 18, 2006

Yeah, save up your money and pay cash. You'll be able to get a better deal and cut out a ton of the paperwork.
posted by elisabeth r at 3:24 PM on March 18, 2006