Can someone in a different state cosign for a car

by Virginia B.
(Chicago, IL)

Question: The banks won't take my out of state auto loan cosigner even with her excellent credit. Here's what happened...

I filed for bankruptcy last year (discharged in Nov 10). Since then I have gotten a great job and was in the market for a new car. My credit is in the low 600's. My Mom said she would cosign with me (she has perfect credit).

I have applied for loans at two different dealers and was very upfront that my Mom would be cosigning with me so that I could get the best possible rate.

I also told both upfront that my Mom lives in California (I'm in Illinois) and asked if it would be a problem - both times I was told no worries.

After my Mom and I gave them our information, I received a call saying that I had been approved on my own (at 13.9% interest!) and that they "couldn't" use my Mom since first I was approved on my own and second, she lived out of state.

I have researched and researched and have found nothing about this! I didn't think a lender could tell you that you cannot have a cosigner - or that there is an issue with an out of state cosigner!

One dealer was a Volvo dealer and the other a Ford dealer. I had $2K to put down, a trade in
and my income is $110K/year.

Any thoughts would be appreciated! This is making me crazy! (I walked away from both cars).

Thanks!
Virginia

Answer: Hi Virginia,

I'm going to start from the bottom up and say that 13.9% is a very good rate for just having a bankruptcy discharged fiveish months ago.

This is a great deal and I would think that it will ultimately turn out to be your best bet, unless you are willing to wait until your bankruptcy gets a bit older. I'm assuming it was Ford Motor Credit that gave you this approval.

Adding a cosigner to an auto loan nowadays has changed somewhat and the prime lenders really only consider it necessary to have a cosigner when someone is a first time buyer with limited credit, more than a way to help someone get prime rates that has had some credit issues.

On top of that, many lenders will not allow out of state auto loan cosigners.

I'm going to paraphrase what a lender once told me regarding a situation similar to yours and I don't mean any insult with this, but this is the way they look at....

"Come on, the guy is forty years old and makes $60k a year, but didn't pay his bills and now wants mom to bail him out on his interest rate. Sorry, but I'll have to pass!"

Seems sort of rude, but that is how they look at cosigners under these circumstances.

What you may want to consider doing is to buy whichever car you wanted and take the 13.9% approval. Pay on this for awhile to reestablish your credit and let your bankruptcy get 18-24 months old.

At that time, you can look to refinance at a much lower rate (assuming your score goes up and credit stays on a good track) shortly down the road. Refinancing is typically pretty easy and should be free.

How’s your credit score? 0-600 Poor, 601-680 Fair, 700-774 Good, 775+ Excellent. Find out your Score now FREE!

Hope this helps and I certainly hope you understand that the example I gave above was not a shot at you or your current situation, but was a real conversation I had with a real lender about a customer in a similar situation as you...

Take care,
Justin

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Automotive Content Editor

Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.

, Automotive Content Editor - January 15, 2020

A cosigner may or may not need to be present when you sign your car loan documents; it all depends on your lender's requirements. Either way, having a cosigner means asking someone to take on a big responsibility.

A Cosigner's Role in an Auto Loan

When you use a cosigner on an auto loan, someone lends you their good credit status in order to help you get approved for a loan you can't qualify for on your own. Cosigners are most common on bad credit car loans, and, in fact, may even be required if a lender is on the fence about approving your application.

In order to use someone as your cosigner, they have to meet all the lending requirements, even though they're not the primary borrower. This means qualifying not only with their credit, but with their income and employment as well. The reason for this is because a cosigner lends you their credit score and agrees to take over payments if you can't keep up. Lenders need to be sure a cosigner is financially able to do this.

Residency Requirements for Cosigners

Unlike yours, however, the residency requirements of a cosigner aren't typically as important to a lender, as long as they're U.S. citizens, residing in the United States. This is why a cosigner may not have to be present to sign an auto loan. Since the vehicle isn't going to be theirs, some lenders don't mind if your cosigner lives elsewhere, even out of state.

In the event that your cosigner isn't someone that can accompany you to the dealership, a lender may allow them to submit signatures on the required documents via fax, but most require an original signature. This means the loan could take longer than normal to be completed since loan documents must be mailed.

When a cosigner isn't present with you, they're going to be required to have their signature notarized. Notary publics can be found in many locations: often at banks, credit unions, and post offices, for example. Once the notarized documents are returned to the finance manager, you can proceed to finish the lending process.

CarsDirect Tip: Each lender has their own rules and regulations regarding cosigner requirements. Not all lenders may allow your cosigner to be absent at the loan signing, so keep that in mind when you consider asking someone to cosign. Also, in today's digital era, there may be provisions in place for some lenders to accept electronic signatures, so be sure to talk to your lender about all the details before you choose your cosigner.

Do You Need a Cosigner?

If you're ready to find your next car loan but worry your credit isn't in the best shape, it's a good idea to have a cosigner on hand before you apply for an auto loan. This way, if you find out for sure that you can't go it alone, you have someone in your corner ready to step in.

As a bad credit borrower, you may not know where to start in your search for a car loan, but we do. At CarsDirect, we work with a coast-to-coast network of special finance dealers that have the lenders available to help people in unique credit situations. To get started on the path toward your next vehicle, simply fill out our easy, free, zero-obligation auto loan request form, and we'll get to work matching you with a local dealership.

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Meghan Carbary, Automotive Content Editor

Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.

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