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Should I include my parents as a cosigner?

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Should I include my parents as a cosigner?

My current standing: I am a college student who lives at home with my parents and I make 1200 monthly. I have very low monthly expenses, my credit card bill averages $100/month. I am trying to purchase a vehicle costing $25,000 and I have $7000 for a down payment. My credit score averages 740 and I have 3 years so far on my credit card history. I understand that most lenders look for atleast $1500/month and am considering having either my mom or dad on the loan.
My mom has a good credit score around 790, but no income. My dad has a good score as well but he already has an auto loan, and I worry that he is over his DTI ratio. Since I most likely need a cosigner, who should I choose? And how likely am I to be approved?

6 REPLIES 6
Regular Contributor

Re: Should I include my parents as a cosigner?

I recently took my 21 year old nephew to our local Hyundai dealer to purchase his first new car. His income was low ($1300 monthly) but his credit was good (scores in the 700s). He was able to get a well equipped Elantra for $19000 +TTL with no money down and no co-signer.
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Message 2 of 7
Community Leader
Valued Contributor

Re: Should I include my parents as a cosigner?

You may be able to get it without a cosigner due to the fact that I assume you don’t pay rent? That would make your DTI quite low which looks good. Plus you have a generous down payment.

Try to go it alone but if income proves to be a problem, they’ll let you add a cosigner.

At one point I was able to get a car loan with no cosigner and my reported income was only like 17k lol DTI is everything to lenders 

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Message 3 of 7
Established Member

Re: Should I include my parents as a cosigner?


@Dshevchuk3 wrote:
My current standing: I am a college student who lives at home with my parents and I make 1200 monthly. I have very low monthly expenses, my credit card bill averages $100/month. I am trying to purchase a vehicle costing $25,000 and I have $7000 for a down payment. My credit score averages 740 and I have 3 years so far on my credit card history. I understand that most lenders look for atleast $1500/month and am considering having either my mom or dad on the loan.
My mom has a good credit score around 790, but no income. My dad has a good score as well but he already has an auto loan, and I worry that he is over his DTI ratio. Since I most likely need a cosigner, who should I choose? And how likely am I to be approved?


Is that car $25K out the door or is that the sticker price? You have a solid down payment, but I just wonder with your income and situation if it is really necessary to get a $25K vehicle right now. I mean, YOLO I get it but with that kinda price of vehicle, you're looking at somewhere around say $350/m for 5 years at 6%...then plus your gas, plus your car insurance, plus maintenance and you're almost up to 50% of your income just to drive a $25K car. Why not look at a vehicle that is more cost effective right now, pay that off, and then by that time you'll hopefully be making more money and you will be in a better financial situation to get a nicer vehicle. Just food for thought.

 

But to answer your question, I would try to get the loan on your own. Considering the risk involved to the lender, they would probably need to be in a position to where it is a "safe bet" for them. So with a 7K down payment, I would look for a vehicle in the 14-17K range OUT THE DOOR with a short term (3-5 years). With your downpayment, it would put the loan around 10K. That would be enticing to a lender because if you were to stop paying on the loan, they can take it and sell it and likely get all of the money they loaned you back. So this I think with you still being a college student would put you in the best situation right now if you have to get a car.



Message 4 of 7
Valued Contributor

Re: Should I include my parents as a cosigner?

You should have no problem getting a loan on your own with that down payment. With one of your parents co-signing, putting their aged credit profile on the line, you'll get better terms and a lower payment.

 

As said above, car insurance can price people out of a car. The bright side is I'm assuming you'll have a full warranty, meaning no worries about repair costs, but make certain to get a quote with your insurance company and figure that payment along with the car payment as a monthly expense. I'm paying for a 19 year old on my insurance right now and even with a good student discount, it's not cheap.

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Message 5 of 7
Frequent Contributor

Re: Should I include my parents as a cosigner?

As others stated you will likely get approved on your own.

 

Cosigning is an unfair burdeon.  We do it for the ones we love but it should be avoided unless absolutely necessary.  

 

Why - because it can inhibit them from getting credit when they need it and if you accidentally miss a payment for whatever reason it can have devastating results for them.  If it was a matter of needing a cosigner to get a clunker $3,000 car then that's another story but to get a new car never burdeon someone with that obligation instead if they don't approve for new go for a certified pre-owned.  CPO and other used cars are much easier to get approved for because they have already depreciated some.

 

I know you parents love you and they would co-sign for you in a heart beat and I know you would never miss a payment.  It's just something that should be avoided unless absolutely necessary.

Message 6 of 7
Regular Contributor

Re: Should I include my parents as a cosigner?


@njcobra10tha wrote:

As others stated you will likely get approved on your own.

 

Cosigning is an unfair burdeon.  We do it for the ones we love but it should be avoided unless absolutely necessary.  

 

Why - because it can inhibit them from getting credit when they need it and if you accidentally miss a payment for whatever reason it can have devastating results for them.  If it was a matter of needing a cosigner to get a clunker $3,000 car then that's another story but to get a new car never burdeon someone with that obligation instead if they don't approve for new go for a certified pre-owned.  CPO and other used cars are much easier to get approved for because they have already depreciated some.

 

I know you parents love you and they would co-sign for you in a heart beat and I know you would never miss a payment.  It's just something that should be avoided unless absolutely necessary.


I agree with this. Many years ago my grandmother co-signed for me for a new(ish) car that in hindsight I knew I couldn't afford. I ended up missing a payment, and it affected her credit. Thankfully she wasn't upset about it, but I felt guilty for a long time and vowed never to ask anyone to co-sign for me for something again. If I can't get it myself, I'd rather just either get something else or wait until I can get what I want.

Message 7 of 7
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