How to Get a Car Loan Without a Co-Signer

August 3, 2018 Financing & Leasing

There’s a few misconceptions we often hear from our customers when it comes to co-signers. Are they necessary if you have bad credit? Are they the same as a co-buyer? Do they increase the risk of your car loan? There’s multiple questions that arise around the concept of co-signers, which is why we’re writing this post!

What is a cosigner on a loan?

A co-signer is someone who partners with you to apply for the loan, making them equally responsible for the borrowed money. If you’re unable to make your monthly payments, they’re obligated to pay back your loan. However, not anyone can be a co-signer. A co-signer’s credit score must be in good standing in order for the lender to approve your loan — generally an ‘excellent’ to ‘very good’ score above 700.
Often times, people will look to a family member, spouse or close friend to act as their co-signer. If you do find yourself in a situation where a co-signer is absolutely required, we suggest asking someone who has been working on their credit for several years and is financially responsible. Remember, asking someone to co-sign a loan for you is putting their credit at risk, so take it seriously.
If you apply for a car loan and find out you do in fact need a co-signer, don’t fear! It’s common and happens with most traditional lenders, such as banks, credit unions and most car dealerships.

Difference between a co-signer and co-buyer

If this is the first time you’re hearing of the term “co-buyer,” fear not. Many people have never heard of it before. However, co-buyer and co-signer can almost be used as interchangeable terms. There are a few differences though.
Let’s start with co-buyer. If a lender requires you to have co-buyer it means their income will be counted as part of your application. This will help you meet the qualification criteria for the loan. and is often referred to as co-mingling. Often times, co-mingling happens if the co-buyer is your spouse.
When it comes to a co-signer, things change slightly. Rather than considering the co-signers credit as part of your application, lenders look at it as a separate party altogether. A co-signer’s income will not become mingled with yours either. In this case, both the co-signer and yourself (or the applicant) must qualify individually for the conditions presented by the lender and be able to meet the monthly car payments.
The important part of all this is that regardless of whether you have a co-signer or co-buyer for your loan, that person will just as much responsibility for the loan as you will.

The risks of co-signing a car loan

If you find yourself in the position of being a co-signer for a friend or family member’s loan, there are a few important things you should consider before signing.
If for whatever reason your friend or family member can’t make their payments, you’ll be responsible to cover them. Acting as a co-signer signals to your lender or bank that you’re responsible for seeing this loan paid through fully. In the unfortunate event that the person you co-signed for can’t continue to pay for their loan, you may end up paying off a vehicle you don’t drive.

Can you get a car loan without a cosigner?

You may have heard that getting a car loan with bad credit isn’t possible unless you have a co-signer. This isn’t the case. Because we lend our own money, we’re able to provide our customers with more flexible repayment terms and lower interest rates.
We encourage all our customers to have full authority over their car loans. Why? Because it gives them the opportunity to take control of their financial health. So let’s talk about some tips for passing the approval process without a co-signer.

Getting a car loan without a cosigner

This is what we suggest you do before applying for a loan!

Learn more about your credit score
Save for a down payment
Budget vehicle expenses into your monthly spending habits
Try out a car loan calculator
Speak honestly about your financial situation
Know the loan approval requirements for no cosigner

Learn More About Your Credit Score

Before you fill out an application, learn more about your credit score so you have a better idea as to what style of vehicle and monthly payment options will work for you.
Check out our blog posts “Does Checking My Credit Score Hurt It?,” and “What Your Credit Score Means” to learn more about your creditworthiness.

Save for a Down Payment

Having a large amount of money to use for a down payment, shows lenders you’re committed to your loan and can decrease your interest rate.

Budget Vehicle Expenses into Your Monthly Spending Habits

When finding a vehicle and loan that works for you, consider your monthly spending habits too. Even if you can afford a $400 monthly payment, your new vehicle will come with other added costs as well, like gas, insurance and maintenance. Try and budget these expenses into the monthly payments too before signing a loan.

Try out a Car Loan Calculator

Once you’ve determined your monthly budget, test out our car loan calculator! Here’s how it works:

Enter your credit situation — good, average or poor.
Determine how much you’re willing to pay for a vehicle
Let us know how long you’d like your loan to be

From there, we’ll do the work and show you both weekly and bi-weekly payment options. Try it out now!

Speak Honestly About Your Financial Situation

At Birchwood Credit Solutions, we understand that a tough financial situation can happen at the most unexpected times. We’re committed to working with you to find an interest rate that works with your life. By being honest, it allows us to learn more about you and ultimately, find you the right vehicle.

Loan approval requirements for no co-signer

Most traditional auto dealers, credit unions and other financial institutions usually require people with less than perfect credit to have a co-signer for their loan because it ensures that regardless of what happens to your financial situation, the loan being repaid by your co-signer.
There are a few key factors lenders usually identify as requirements for a co-signer. If you recently moved to a new residence you may be required to have a co-signer because you haven’t yet proved you can make your monthly payments on time. Or, if you’re unemployed, already have an existing car loan or are new to Canada and haven’t built your credit yet, lenders may also require you to have a co-signer.
However, we do things differently at Birchwood Credit Solutions. Our in-house financing allows us to lend our own money, offering you a more flexible repayment plan and lower interest rates. We don’t require co-signers because we look at more than just your credit score.

Here are the only three things we require our customers have in order to be approved:

A valid drivers license
Have official Canadian residency
Earn a minimum of $1,500 monthly

We understand that sometimes life gets in the way of credit and unfortunate circumstances, such as bankruptcy or job loss, can result in a less than perfect credit situation. But our goal is to get everyone in a car and driving, which is why we look at more than only your credit history.

Fill out our three-minute online application to learn more about what type of loan you can get with Birchwood Credit Solutions.Our goal at Birchwood Credit Solutions is to get you in a car and driving, so we’ve streamlined our process to make it as simple and hassle-free as possible for you. Once we’ve looked over your information and have a better understanding of your financial situation, we work with you to find a payment plan that fits your lifestyle.

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Written by

Rebecca Lake