How Much Does a Cosigner Help on Auto Loans?

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Having a cosigner on your loan can sometimes help you secure more favorable loan terms. Basically, a cosigner agrees that if you stop making payments, they will step in to pay them.
Your credit can have a major impact on your ability to get a good
car loan
. And if your credit isn’t great, you may not qualify for financing you can comfortably afford. Enter cosigners.
There are lots of misconceptions about how cosigners work, and it can be confusing if you’re new to it all. That’s why
car insurance
comparison shopping and broker app
has compiled everything you need to know about how cosigners help on auto loans.
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What is a cosigner for a car loan?

Simply put, a cosigner is someone who backs the loan—so if you default on your payments, they are held accountable instead.
Many lenders require cosigners for applicants who have a low income or poor credit history.
A cosigner with a good credit history can go a long way to mitigating the risk, and it gives you a better shot at getting a good loan for your vehicle.

How much does a cosigner help on car loans?

A cosigner can make a significant difference in the loan terms you qualify for. And depending on your income and credit history, a cosigner may actually be required for you to qualify for any loan at all.
Here’s a quick example:
A lender might advertise an interest rate of 4.5% for 72 months on a new car loan. Once they run your credit, though, your only option without a cosigner may be a loan at an interest rate of 9%. You’d pay more than double in interest, which can add up to thousands of extra dollars on your car loan in the long run.
If you had a cosigner, you could qualify for a much lower interest rate (so you could keep those thousands of extra dollars in your pocket).
A cosigner doesn't actually need to pay or help any amount on the loan unless you need them to.

Cosigner vs co-applicant

It’s important to differentiate between a cosigner and a co-applicant; they definitely aren’t the same thing.
A co-applicant buys the car with you and has equal ownership of the vehicle purchased with the loan. Their credit history and income are used alongside yours to determine whether you, together, can afford the vehicle.
A cosigner, on the other hand, has no ownership. They’re only there to provide you with a credit boost so that you can secure better terms for your loan.

How to make your car costs more affordable

When you’re purchasing a car, you want to make sure your auto loan is something that you can afford. Even though you might qualify for a bigger loan with a cosigner, it’s never a good idea to take on higher monthly payments than you can comfortably cover.
Remember, you’ll have insurance payments on top of your car loan. Thankfully, an insurance comparison app like
can help you find savings.
Jerry is the easiest, most effective way to find a cheap car insurance policy that meets your needs and your budget.
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If that’s not enough, Jerry can also help you compare rates and find out how much you can save on your loan. As an AI-powered broker, Jerry gives you all of the savings and coverage with none of the hassle.


When is it a good idea to have a cosigner on a car loan?

If you have poor credit and/or a low income, having a cosigner with good credit can really help bolster your application and get you better loan terms.
If you’re a recent grad, for example, you may have a fairly low salary and little in the way of credit history. Having a cosigner can help you meet approval requirements so that you can buy a car, while at the same time helping you build your own credit history.

Is there a downside to having a cosigner?

The downside is really for the cosigner, rather than the applicant.
By cosigning on a loan, they’re exposing themselves to a significant amount of financial risk if you, for any reason, cannot continue making your regular payments.
If you default on the loan, it will impact your credit and theirs—so they’re also putting their credit score on the line. That's why it's a good idea to make sure you cosign with someone you trust.
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