Can You Finance a Car Loan For Someone Else?

Can You Finance a Car Loan For Someone Else?

Posted on January 31, 2023

Today we’re tackling a rather unusual question. The question was ‘Can I apply for an auto loan for my sister? I can easily afford hers and mine but she cannot qualify. Can I do that?’ This is an intriguing question and we asked our auto loans team to outline your options if you’re trying to finance a car loan for someone else.

Can You Finance a Car Loan For Someone Else?

The short answer is no, you cannot apply for an auto loan for someone else. It isn’t illegal but it isn’t something most lenders will do.

In the example above, the potential borrower likely has poor credit for one reason or another. They are ineligible for an auto loan for good reason, so a lender wouldn’t want to lend to someone else on their behalf.

In the vast majority of cases, the auto loan is secured on the car. The primary borrower must be the legal owner of that car. This is mainly so the lender can legally repossess it should you default on the loan.

Some lenders call this situation an ‘accommodation deal’ and won’t go near it. Even in the example, a brother and sister, would not qualify for an auto loan.

That’s not the end of the story though as there are still options.

Alternatives to Financing a Car Loan for Someone Else

Co-borrowing: In the example above, the brother could be co-borrower on the auto loan with his sister. This gives him legal title to the car alongside his sister and would be perfectly fine.

The sister could be primary borrower and be responsible for repayments. Should she default, the brother would have to take over otherwise they would be in default.

Co-borrowing is a useful tool for accessing auto loans for people with poor credit.

Co-signing: Co-signer auto loans are also possible for people with bad credit. You could offer to co-sign the loan with the primary borrower to guarantee the loan. As long as you have good credit and would qualify for the loan, you can go in on it with the primary borrower so they qualify.

Co-signers don’t get legal title to the car like they do with co-borrowing but will still be able to help.

Sub prime car loan: The other option is a bad credit car loan. If someone has an insufficient credit score for a standard loan, they could use a bad credit car loan to get a car. It would be more expensive than a standard loan but it’s a viable route to get the car. Click here to learn more about financing a bad credit car loan.

Using a bad credit car loan in means no co-signer or co-borrower is required. It should also help improve the credit score with on-time payments.

The one good thing about modern car finance is the wealth of options available. Whatever your situation, whatever your credit score, there is usually a way to get you what you want.

If you’re in a similar situation, contact our auto loans team. We would be happy to help.

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