If you plan to obtain a cosigner for your loan, there are a few requirements you must meet.
The cosigner must be willing to sign the contract and guarantee that he or she will pay the agreed-upon amount in the event that you are unable to. The lender requires a written guarantee and will not accept a verbal commitment.
Proof of a Source of Income
At the time of contract execution, adequate proof of sufficient income must be provided. If your cosigner is employed by a company, he or she will need to provide pay stubs. If the individual is self-employed, income tax return slips will be required. If you are unable to provide evidence of income, the lender may reject your loan application.
Sometimes, potential lenders may investigate your cosigner's financial stability. In addition to the cosigner's tenure with the employer, they may investigate his/her reputation in the community. When approving your loan, they view the cosigner as a member of your 'team.'
The Danger Factor
Before involving a cosigner, you must consider the following risks in addition to the requirements:
The major risk is the cosigner's potential financial setback. By agreeing to assist you, the cosigner risks a reduction in his or her own credit score.
The cosigner will be sued if the borrower fails to repay the loan. Therefore, it is prudent to repay the loan on your own and not rely solely on the cosigner.
After signing the contract, a cosigner cannot evade his or her responsibilities. Therefore, he/she is responsible for the auto loan. It may result in discord between you and the cosigner.
In the end, choosing a cosigner is a personal decision. The understanding between you and your cosigner must be crystal clear from the outset. It will ensure that confusion cannot arise in the future. Remember that a mature car buyer will not make others responsible for his or her expenses and will make responsible monthly payments."""