Ask Stacy: Should I Co-Sign My Fiancee’s Car Loan?

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Couple With New Car
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Here’s this week’s question:

My fiancee and I will be getting married in 6 weeks and she is facing some car troubles. Her car has been paid off for over 6 years now, so it isn’t unexpected, and we are looking at buying a car for her.

Given that my car loan is my only debt (not for long), would it be wise for me to apply individually for the credit on her car? Or is there a better alternative with me or her co-signing on the other’s loan (not sure which would be better)?

— Mark

Here’s your answer, Mark!

First, congratulations on your upcoming nuptials! You also deserve kudos for finding someone who’s apparently as thrifty as you are and hopefully also as adept at living beneath their means.

As for your question: I’m sure you’re aware that it’s a bad idea to co-sign other people’s loans. But assuming that you’re absolutely, positively going to tie the knot, what I’d do is approach potential lenders (credit unions may offer you the best deal, although you can also use our loan search to find auto lenders with the best rates) and lay your cards on the table: Ask what interest rate you’d qualify for, as well as the rate your fiancee would be able to get given both of your incomes and credit scores. They can probably give you some guidance without having to formally apply for credit.

Unless you’ve done it recently, it’s a good idea to check your scores before applying for credit. See “How to Get a Free FICO Score” to take a look at yours and learn how to improve it as fast as possible.

In general, the person with the highest score will probably end up getting the best terms, providing they have the credit capacity needed to carry the payments. If you turn out to be the primary borrower, adding her as a co-borrower will help her improve her score as you folks make timely payments on the loan.

But be aware that, should you break up, the loan doesn’t. You’ll be responsible until it’s paid off. So if you cosign the loan, make sure you also co-own the car. For more, see “Ask Stacy: Is It Possible to Get Out of a Co-Signed Loan?

Hope that helps. Best of luck to you and your bride-to-be, Mark!

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About me

I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate. If you’ve got some time to kill, you can learn more about me here.

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