Can a Parent Cosign on an Auto Loan?

Can a Parent Cosign on an Auto Loan?
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When you buy a car, you may not qualify for a car loan on your own. Or the dealer, bank or credit union’s interest rate for the car loan may be too high and make your payments unaffordable or just ridiculous. One of your parents can cosign your auto loan to help you qualify or reduce your interest rate.

Definition of Cosigner

Credit unions, banks, auto financing companies and dealers allow you to have a cosigner on an auto loan. Parents are often the first choice for a young person seeking a cosigner, although any adult can cosign a loan with you. Your parents know you, your work history, your responsibility level and where you live so they often agree to cosign. To cosign means to also sign the loan. So when one of your parents cosigns, they agree to the same terms on the auto loan as you do.

Equal Responsibility

When your parents cosign for your auto loan, your car loan provider will have the same claim on them as it does on you. You and your cosigning parent have the same legal obligations and responsibilities for the bill. However, your car loan provider will only send you a bill because you are the first signer on the loan. Or you may receive one set of payment coupons to send in with your payment each month. In both cases, your bill or coupon will include both your name and the name of the parent who cosigned.

Payments and Delinquencies

The lender does not care who pays the bill, as long as the loan gets repaid. You may still live at home or, if you are in college, have your parent’s address as your permanent address. In both cases, your parent is more likely see the notice in the mail if you are late on your payments. It’s better to let your mother or father know in advance, however, if you have trouble making the payment. If you miss a payment, your delinquency will appear on your credit report and your parent’s credit report.


You earned enough money from a job to buy an old car or put a sizable down payment on a newer car. You still have the same job that gives you the money to make the payments on a loan. However, your credit union turned you down and the dealer quoted you a 24 percent interest rate because you have almost no credit history. So you get your father to cosign a car loan with a reasonable interest rate from the credit union. The car loan now appears on your credit report and your dad's. You make all your payment on time, pay off the loan and establish a credit history.