Exploring Co-Signing for Bike Loans: Pros and Cons
Article by Drivio | 10th Sep 23
Worried about getting your bike loan approved as a result of a poor credit record? Co-signing for a bike loan can help you get the loan sanctioned. However, it’s crucial to weigh the benefits and risks of co-signing a bike loan in the first place.
Bike loans continue to be highly sought financing options when it comes to purchasing your dream motorcycle. However, obtaining a loan isn’t that easy, particularly with a stained credit score. If you have a limited credit history or a less-than-perfect credit score, lenders might be reluctant to sanction a motorcycle loan for you.
While that’s disheartening to learn, you need to find other ways round it. For instance, exploring co-signing bike loans might be a viable solution. In these cases, banks and NBFCs check the credit score of both the individuals who are applying for the loan. So, if you co-sign a bike loan along with someone with a better credit history, you stand better odds to get the loan sanctioned.
In this article, let’s understand the benefits and risks of co-signing a bike loan. Whether you are a potential borrower or someone willing to co-sign for a close friend, it’s essential to know your obligations.
What is Co-Signing for a Bike Loan?
Co-signing for a bike loan involves applying for the loan along with a secondary individual. The co-signer agrees to share equal responsibility with the primary borrower to repay the loan.
The creditworthiness of the co-signer is usually sound. If you have a weak credit score, the lender would evaluate the financial stability of the co-signer for sanctioning the motorcycle loan. Therefore, you need a co-signer to strengthen your application. Bankers are more likely to approve loans when you have a co-applicant.
Now that you know why you need a co-signer, let’s check out the pros cons of having a secondary applicant.
The Pros of Having a Co-Signer for Bike Loans
Have a look at the perks of having a co-signer for your motorcycle loan.
1. Higher chances to get approved
Co-signing a loan significantly enhances the chances to get an approval. Particularly, if your credit score isn’t too impressive, lenders would be reluctant to sanction the loan. Having a co-signer can significantly strengthen your application.
2. Lower interest rates
When you apply for a motorcycle loan with a co-signer, the risk exposure for your lender is low. Thus, you may qualify for favorable interest rates. This translates to lower EMIs, helping you make potential savings over the loan tenure.
3. Build your credit record
While exploring co-signing bike loans, it’s crucial to understand how these financial products can help you build or rebuild your credit record. Making timely repayments enhances the credit score of both the primary and the secondary applicant.
4. Access to better motorcycle models
Co-signing a motorcycle loan strengthens your credit profile. This explains why you can access high-end motorcycles or better models. Even if your dream bike comes with a high price tag, you can obtain a loan along with a co-signer.
The Cons of Having a Co-Signer for Bike Loans
When you evaluate the benefits and risks of co-signing a bike loan, make sure to understand the drawbacks of co-application.
1. Shared responsibility
The most significant drawback of co-applying for a motorcycle loan is that you share the same responsibility as the primary borrower when it comes to repayments. In case the primary borrower defaults or makes a late payment, it may affect the credit score of the co-applicant. Moreover, it brings you a financial obligation that you would be reluctant to take.
2. Strained relationships
Co-signing loans can lead to strained relationships, particularly if the primary borrower encounters financial hurdles. Often, conflicts and disagreements arise if non-payment of loans affects the credit score of the co-signer. This can seriously impact personal connections.
3. Limited control
As a co-signer, you have limited control over the loan. You have no hand in the loan terms or decisions without obtaining consent from the primary borrower. At times, this can turn out to be frustrating indeed.
4. Potential financial risk
Remember, as a co-signer, you are equally liable in case of loan defaults. If the primary borrower runs into financial hurdles, you need to pay the outstanding debt.
Co-signer insights: What you should know
If you are considering co-applying for a bike loan, here are some valuable guidelines for you.
1. Understand your responsibilities
As a co-signer, you are just as responsible for repaying the loan as the primary borrower. Make sure that the motorcycle owner is financially stable to pay off the debt.
2. Maintain open communication
When it comes to sharing financial responsibilities, communication is the key. Discuss what you expect from the deal with the primary borrower, repayment terms, and potential scenarios. This can help you avoid misunderstandings down the road.
3. Monitor the loan
As a co-signer, it’s wise to stay informed about the status of the loan. Check the statements and payments regularly to make sure that the primary borrower remains financially responsible. Detecting issues early can prevent major financial problems.
4. Have an exit strategy
While exploring co-signing bike loans, it’s essential to have an exit strategy in place. Discuss with the lender and the primary borrower to understand this strategy, so that you can push away unwanted liabilities.
If you need a better financial credibility to purchase your dream bike, co-signing can be a lifeline for you! However, it’s crucial to understand the benefits and risks of co-signing a bike loan. While co-signed bike loans have higher approval rates and come with lower interest rates, they also carry the risk of shared financial responsibility.
Therefore, exploring co-signing bike loans along with the implications and liabilities is imperative. With the right approach, co-signing for a bike loan can be mutually beneficial.