Purchasing a new, certified pre-owned, or used vehicle is exciting, but it also comes with a number of important financial questions that buyers need to consider before making such a large investment. At Prestige Volkswagen, our team of financing experts is dedicated to providing drivers near Turnersville, Cherry Hill, and Mount Laurel, NJ, with the resources and support to make their dream of getting behind the wheel of a new vehicle a reality.
Understanding your options is important when applying for an auto loan. If you currently find yourself in a situation where your credit score might hinder you from securing a decent rate, you may be weighing the option of using a cosigner. If you find yourself asking, "Do I need a cosigner if I have bad credit?", continue reading this informative guide to learn the answer!
What is Credit and What's a Good Score?
In the simplest of terms, a credit score is a way for lenders to measure how safe of a risk you are to lend money to. The last thing a lender wants to do is offer you a loan you won't be able to pay back. This would be bad for both parties involved, so credit scoring is a way to avoid an overly risky financial situation.
A credit score considers a number of factors, including:
- Payment history
- Credit history length
- Types of credit used
- Newly acquired credit
- Total debt
Your credit score is always shifting and will change over time, but keeping a close eye on these five factors should have a significant impact on your ability to build and maintain a good score. Scores range from 300 to 850 with any score falling below 500 considered "poor," while generally, anything above 680 is considered "good," and anything above 750 is "excellent." Obviously, the higher your score, the better your chances of securing a favorable rate.
What is the Benefit of Using a Cosigner?
Certain life situation may hurt your chances of securing a decent auto loan such as a low credit score or the fact that you're young and have limited credit history. In these situations, using someone like a parent or spouse could be a worthwhile option. Lenders will want to make sure your cosigner is deemed "creditworthy," meaning they possess a good credit score and history that can reasonably back the amount taken out on the loan.
A cosigner with good to excellent credit could secure you a better interest rate and significantly lower your monthly car payments. One very important detail to consider: If you find yourself unable to make payments on the vehicle, the cosigner is still fully obligated to meet those payments and will incur serious penalties, like late fees and collection charges, should you default on the loan. This should be seriously considered before agreeing to this type of arrangement.
Learn More About Your Financing Options Today
At Prestige Volkswagen, we're committed to providing drivers near Turnersville, Cherry Hill, and Mount Laurel with the best available financing and resources to help them drive off in the vehicle of their dreams. If you're interested in seeing what types of options and special programs are available to you, stop by our convenient location or schedule a time to meet with one of our financing experts today!