Co-signing or. co-owning a car: How do you tell the differences? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial choices by offering interactive financial calculators and tools, publishing original and objective content, by enabling users to conduct research and compare information for free to help you make informed 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 Earn money The products that appear on this site come from companies that pay us. This compensation could affect how and when products are featured on this site, including such things as the order in which they appear within the listing categories and other categories, unless prohibited by law. Our mortgage, home equity, or other home loan products. But this compensation does have no impact on the information we publish, or the reviews that appear on this website. We do not cover the universe of companies or financial offers that may be available to you. FG Trade/Getty Images
2 min read Published 28 October 2022
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Written by Bankrate Written by This article was generated using automation technology and thoroughly edited and fact-checked by an editor from our editorial staff. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are passionate about helping readers feel confident to take control of their finances by providing concise, well-researched and clear information that breaks down complicated topics into digestible pieces. Written by Mark Kantrowtiz and reviewed by Nationally acknowledged student financial aid expert Mark Kantrowitz is an expert on financial aid for students including the FAFSA as well as 529 plans, scholarships education tax benefits and student loans. The Bankrate promise
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We are compensated in exchange for placement of sponsored products and services, or by you clicking on specific links on our site. So, this compensation can affect the way, location and in what order items are listed in the event that they are not permitted by law. This is the case for our mortgage home equity, mortgage and other products for home loans. Other factors, like our own rules for our website and whether a product is offered in your region or within your self-selected credit score range may also influence the manner in which products are featured on this website. We strive to offer a wide range offers, Bankrate does not include specific information on every financial or credit products or services. Co-signing for a car and co-owning it are two different ways to approach applying for the loan with another borrower. In both situations, the secondary borrower needs to have sufficient credit and earnings to pay for this loan on their own. However, each comes with advantages and drawbacks, dependent on what both parties want. There are some differences between a co-signing and co-owning car. A co-signer an individual who is responsible for paying off the loan however, they don’t possess any legal title to the car. A co-owner is entitled to the same rights to it. Co-signing on a car loan in the case of a car co-signer, they agree to pay the monthly payments if the borrower isn’t able to pay these payments. This is a big choice to make and could be . Benefits of cosigning on the car loan Help qualifying: A co-signer can for an auto loan which they wouldn’t otherwise be eligible for. Credit building If the primary borrower can remain on top of their payments, the credit score of both the primary borrower as well as the co-signer can be positively affected. Reduce costs: If the cosigner has a very good to excellent 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 on the car loan the responsibility for payment If the borrower fails to pay, the co-signer is in charge of the totality of loan repayments. No legal claim: The co-signer is not in the title of the car and has no legal claim to the car. Co-ownership of a vehicle in the case of a car, both the owner as well as the co-owners are listed in the document. Having a co-owner doesn’t change any fact about the reality that the borrower who is the main one owns the property. If the car is titled or registered, the primary borrower could require permission to sell the vehicle. Benefits of owning a car with a co-owner Security for the co-owners A co-borrower is protected by the safety of their name being on the title. Better terms: If both borrowers have good credit the primary borrower might be extended more favorable terms than if they had applied independently. Risks of co-owning a car Equal Rights: Each co-borrower enjoys the same rights to the vehicle as the principal borrower. This means that the co-owner has to be involved in the transfer or sale of the car. Insurance: Even if the co-owner doesn’t actually use the car, they will likely need to be on the insurance policy. This can mean higher costs for everyone involved. How to choose between co-signing and co-owning the car. The primary distinction between co-signers and co-borrowers is the level of investment in the loan. Co-borrowers are more accountable and have greater control over the loan than cosigners. Co-borrowing is a good option for those who have good credit and want to share equal rights to the vehiclefor example, an engaged couple who wish to purchase a car together. On the other hand, co-borrowing is for those who doesn’t meet the requirements for the loan in the first place, or needs help qualifying for a larger amount or lower interest rates. How do you prepare yourself to co-sign or purchase an automobile To become co-signer on a loan it is necessary to be able to prove a steady income and be able to meet the requirements for credit scores that is set by the lender. Similar requirements apply to co-ownership, as the credit score of both the people who are borrowing is taken into consideration. Even if you meet the criteria, an open dialogue should be conducted between both parties. Co-signing and co-owning both come with substantial credit risk. Be sure to have an insurance plan for the event that the primary borrower can’t pay. The main point is that there are many reasons you might want to co-sign or co-own an automobile with a different person. In any case, it is important for both of you to be on the same page about what the relationship entails and what’s expected of both of you. Find out more
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The article was written by produced using automation technology, and thoroughly edited and fact-checked by an editor from our editorial team. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are enthusiastic about helping readers gain the confidence to take control of their finances through providing precise, well-researched and well-researched information that breaks down otherwise complex subjects into bite-sized pieces.
Auto loans editor
Review by Mark Kantrowtiz by Nationally recognized student financial aid expert Mark Kantrowitz is an expert on student financial aid, the FAFSA as well as 529 plans, scholarships educational tax benefits, and student loans.
Nationally recognized student financial aid expert
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