Co-signing vs. co-owning a car: How do you tell the differences? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by offering interactive financial calculators and tools that provide objective and unique content. We also allow you to conduct your own research and compare data for free and help you make sound financial decisions. Bankrate has partnerships with issuers, including but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make money The products that are advertised on this site are from companies that pay us. This compensation could affect how and where products appear on the site, such as such things as the sequence in which they be listed within the categories of listing, except where prohibited by law. Our mortgage home equity, mortgage and other products for home loans. But this compensation does not influence the content we publish or the reviews that you read on this site. We do not contain the universe of companies or financial offers that may be available to you. FG Trade/Getty Images
2 minutes read. Published 28 October 2022
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Written by Bankrate Bankrate. This article was written using automation technology and thoroughly edited and fact-checked by an editor on our editorial staff. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers gain the confidence to control their finances by providing concise, well-researched and clear information that breaks down otherwise complicated topics into digestible pieces. Written by Mark Kantrowitz Reviewed by Nationally well-known expert on student financial aid Mark Kantrowitz is an expert on student financial aid as well as the FAFSA, scholarships, 529 plans, education tax benefits as well as student loans. The Bankrate promise
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We receive compensation for the promotion of sponsored goods and services or when you click on certain hyperlinks on our website. Therefore, this compensation may impact how, where and in what order products are listed and categories, unless it is prohibited by law for our mortgage home equity, mortgage and other products for home loans. Other factors, such as our own website rules and whether the product is available within the area you reside in or is within your self-selected credit score range can also impact the manner in which products are featured on this website. Although we try to offer the most diverse selection of products, Bankrate does not include specific information on every credit or financial products or services. Co-signing and co-owning cars are two ways to approach applying for the loan with an additional borrower. In both instances the second borrower has to have enough credit and income to be able to fund their loan independently. But each has benefits and drawbacks, dependent on the kind of thing both parties are looking for. The differences between a co-signing and a co-owning a car A co-signer is an individual who is accountable for the repayment of the loan but does not have any legal ownership of the vehicle. A co-owner has equal claim towards it. Co-signing on an automobile loan in the case of a car co-signer, they agree to pay the monthly payments if the borrower isn’t able to pay the payments. This is a major decision that must be made and it will . Benefits of co-signing the car loan Assistance in getting a loan: A co-signer may be eligible apply for an auto loan which they wouldn’t otherwise be eligible for. Improve credit score If the primary borrower can keep up with payments, the credit of co-signers and co-signer could be impacted positively. Reduce cost: If the co-signer is a good to good credit score and the primary borrower is in good standing, they can get a better fee and interest rate. There are risks associated with co-signing for a car loan Responsibility for payments In the event that the borrower is in default the co-signer will be responsible accountable for all loan payments. No legal claim Co-signers are not on the title and does not have any legal right to the car. Co-ownership of a vehicle in the case of a vehicle, both the owner and the co-owners are listed on the title. Co-ownership doesn’t alter any fact about the reality that the borrower who is the main one has the title to the property. Depending on how the car is registered or registered, the primary borrower could need permission before they can sell the vehicle. Benefits of co-owning a car Safety for co-owner: The co-borrower has the security that their names are on the title. Better terms: If both borrowers have good credit, the primary borrower may get more favorable terms than if they applied on their own. Risks of co-owning a car equal rights: The co-borrower has the same rights to the vehicle as the primary borrower. This means that the co-owner has to participate in either the transfer or sale of the vehicle. Insurance: Even if co-owners don’t actually utilize the vehicle, they will likely need to be covered by the insurance policy. This could mean more expensive costs for both involved. How to choose between co-signing and owning a car The main difference between co-borrowers and other co-signers is the level of investment in the loan. Co-borrowers are more accountable and have greater ownership than co-signers. Co-borrowing is best for people who have good credit and want to share equal rights to the vehicle — such as couples who want to purchase a vehicle together. On the other hand, co-borrowing is for those who isn’t eligible for the loan in the first place, or requires assistance in obtaining a larger amount or low interest. How to prepare for co-signing or co-own a vehicle To become a co-signer on the loan you must have a stable income and be able to meet the criteria for credit score that is set for you by your lender. The same is required for being a co-owner, because the credit score of both borrowers is taken into consideration. Even if you meet the requirements, an open conversation should be had between both parties. Co-signing and co-owning both carry substantial credit risk. You must ensure that there is an insurance plan in case the principal borrower is unable to pay. The bottom line There are a variety of reasons why you might want to co-sign a car with another person. In any event it is crucial for both of you to be on the same page regarding what their relationship is about and what’s expected of both of you. Find out more
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The article was written by generated using automation technology that was then thoroughly edited and checked by an editor from our editorial staff. Edited by Rhys Subitch Editor: Auto loans Editor Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain confidence to manage their finances through providing clear, well-researched facts that break down otherwise complicated topics into digestible pieces.
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Review by Mark Kantrowtiz by Nationally known student financial aid expert Mark Kantrowitz is an expert on student financial aid, the FAFSA and 529 plans, scholarships, education tax benefits as well as student loans.
Nationally acknowledged expert in student financial aid
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