Secured vehicle loans

Can I get approved for a car loan with a cosigner?

Yes, you can increase your chances of getting approved for a car loan in Canada if you have a co-signer. A cosigner essentially acts as a guarantor for the loan, ensuring that the loan will be repaid even if the primary borrower runs into difficulties.

Here's how the process typically works:

1. Choose a guarantor: find someone willing to give you a car loan. This person must have a good credit history, a stable income, and a strong financial position.
2. Apply for a car loan: the lender will evaluate both your creditworthiness and the creditworthiness of the cosigner.
   Approval and loan terms: if approved, the terms of your car loan will depend on both your financial situation and the financial situation of the cosigner. The interest rate and loan amount will be determined taking into account both credit profiles.
3. Shared responsibility: It is important to understand that both you and the cosigner are equally responsible for repaying your car loan. If you miss a payment or default on your loan, the cosigner is responsible for the remaining amount.
4. Build credit: if your goal is to improve your credit, making on-time payments on your car loan with a cosigner can have a positive impact on your credit score.

Before entering into a car loan agreement, it is critical to have open and honest communication with your cosigner. Discuss the terms of the loan, the responsibilities associated with it, and what will happen in the event of financial hardship.

As an alternative, you can also take out a personal loan. Your possible expenses:

Personal loan calculations for 1 year (example)

Who can be a guarantor in Canada?

A guarantor is someone who agrees to be responsible for repaying the loan if the primary borrower defaults. Lenders may require a cosigner if the primary borrower has a limited credit history, poor credit score, or insufficient income to qualify for a loan on their own. Here are some common types of individuals who may be eligible for a loan in Canada:

1. Family members: parents, siblings, and other close family members are often considered suitable guarantors. They are more likely to be interested in helping the primary borrower secure the loan.
2. Spouse or partner: a spouse or domestic partner is also an option. Lenders may consider the combined income and creditworthiness of both individuals.
3. Relatives or friends: In some cases, non-family members, such as close friends or relatives, may be accepted as guarantors.
4. Others with a good credit history: cosigners are usually required to have a good credit history. Lenders want to be confident that the cosigner can repay the loan if necessary.

Guarantors generally must be of legal age and reside in Canada. Additionally, lenders may have specific eligibility criteria for co-signers, so it is recommended that you consult with your lender to understand their requirements before considering co-signing a loan.

Lenders may evaluate a cosigner's income to ensure they have the financial ability to cover loan payments if the primary borrower is unable to do so.

Does co-signing affect your credit in Canada?

Yes, co-signing a loan can affect your credit in Canada. When you co-sign a loan, you are essentially assuming shared responsibility for the debt with the primary borrower.

Here's how it could affect your credit:

1. Credit request. When a lender checks your credit history to evaluate your eligibility as a cosigner, it results in a thorough review of your credit report. While one hard inquiry may have minimal impact, multiple inquiries over a short period can lower your credit score slightly.
2. Debt obligation. A cosigned loan appears on your credit report as part of your total debt liability. This may affect your debt-to-income ratio and affect your ability to qualify for other loans or lines of credit.
3. Use of credit. A cosigned loan contributes to your overall credit utilization, which is the ratio of your total credit card balance to your credit limits. Higher credit utilization can negatively impact your credit score.
4. Payment history. Your credit report shows your payment history on your co-signed loan. If the primary borrower falls behind on payments or defaults, it will be noted on your credit report, which could damage your credit score.
5. Impact on credit rating. The impact on your credit score will depend on various factors, including your loan size, payment history, and your overall credit profile. If the primary borrower makes on-time payments, this can have a positive impact on your credit. However, missed payments or defaults can harm your credit rating.

It is important to carefully consider the implications of co-signing a loan. While this can help a person with limited or bad credit qualify for a loan, it also comes with risks. Before you agree to co-sign, make sure you trust the primary borrower's ability to make timely payments. Also, maintain open communication with the borrower to stay updated on the status of the loan.

How do I remove a cosigner from a car loan?

Removing a cosigner from a car loan in Canada can be a complex process and is generally subject to the terms and conditions of the loan agreement. Here are several potential options to consider:

1. Refinance the loan: one common way to remove a cosigner is to refinance the car loan. If your credit has improved since the initial loan agreement, you may be eligible for a new loan in your name only. This new loan would be used to pay off the existing loan, effectively removing the cosigner. Keep in mind that you must meet the lender's criteria for refinancing.
2. Make timely payments: if you continue to make timely payments on the car loan, your credit may improve over time. Once your credit improves, you may be eligible to refinance the loan or qualify for a new loan without the need for a cosigner.
3. Negotiate with the lender: contact the lender and inquire about the possibility of removing the cosigner from the loan. Some lenders may have specific policies or conditions under which they allow the removal of a cosigner.
   Pay off the loan early: if you have the financial means, you may choose to pay off the car loan early. This can be done through lump-sum payments or by refinancing the loan in your name only. Once the loan is paid in full, the cosigner's obligation is typically discharged.
4. Sell the car: another option is to sell the car and use the proceeds to pay off the existing loan. If the car's value is sufficient to cover the loan balance, this can be an effective way to remove the cosigner. However, if there's a shortfall, you'll need to cover the remaining amount.
5. Check the loan agreement: review the terms and conditions of the loan agreement to understand any specific provisions related to removing a cosigner. Some loans may have clauses that allow for the removal of a cosigner under certain circumstances.

Before taking any action, it's crucial to communicate with the lender and carefully review the terms of the loan agreement. Additionally, consult with a financial advisor or legal professional for guidance based on your specific situation and the laws governing loans in your province.

See the similar FAQ about Canadian banks:

• Overdraft protection from BMO
• RRSP loans from BMO
• What creditor insurance policies does CIBC offer?
• What is the CIBC loan number?

Details of companies offering the financial services:

Bank Of Montreal

Head office’s address: 119, rue Saint-Jacques Montreal, Quebec H2Y 1L6

Contact center: 877-225-5266

Phone: 416-867-5000

Web-site: http://www.bmo.com/main/personal

Swift code: BOFMCAM2

Stock code: BMO

BSB: 001

Canada Auto Finance

Web-site: https://www.canadaautofinance.ca

CIBC

Head office’s address: 199 Bay St, 44th Floor Toronto

Contact center: 800-465-2422

Web-site: https://www.cibc.com/en/personal-banking.html

Swift code: CIBCCATT

Stock code: CM

BSB: 010

Carloans411

Head office’s address: 4950 Yonge St. Suite 2200 Toronto, ON M2N 6K1

Contact center: 1(877) 250-2327

Web-site: https://carloans411.ca/

Carsfast

Web-site: https://carsfast.ca

Clutch

Head office’s address: 223 Evans Avenue Toronto, ON, M8Z 1J5

Contact center: 647-955-5340

Web-site: https://www.clutch.ca/

RBC Royal Bank

Head office’s address: 200 Bay St, 9th Floor South Tower, Toronto

Contact center: 800-769-2511

Web-site: http://www.rbc.com/canada.html

Swift code: ROYCCAT2

Stock code: RY

BSB: 003

Scotiabank

Head office’s address: Scotia Plaza, 44 King Street West Toronto

Contact center: 800-472-6842

Phone: 416-866-6430

Web-site: http://www.scotiabank.com/ca/en/0,,2,00.html

Swift code: NOSCCATT

Stock code: BNS

BSB: 002

SkyCap Financial

Head office’s address: 1020 Bayridge Dr. #104, Kingston

Contact center: (877) 924-4557

Web-site: https://skycapfinancial.ca

Super Daves Auto

Head office’s address: Dartmouth: 1015 Main St.

Contact center: 902-702-0027

Web-site: https://www.superdavesautosales.ca/

TD Bank

Head office’s address: Toronto-Dominion Centre, Po Box 1 Stn Toronto Dom, Toronto

Contact center: 866-222-3456

Web-site: https://www.td.com/about-tdbfg/our-business/index.jsp

Swift code: TDOMCATTTOR

Stock code: TD

BSB: 004