Co-signing as opposed to. co-ownership of a vehicle: What’s the difference? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make smarter financial decisions by providing you with interactive financial calculators and tools that provide objective and unique content. We also allow you to conduct research and compare information for free and help you make financial decisions with confidence. Bankrate has agreements with issuers such as, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that are advertised on this site come from companies that pay us. This compensation can affect the way and where products appear on the site, such as, for example, the order in which they may appear within the listing categories, except where prohibited by law. Our mortgage, home equity and other home lending products. But this compensation does affect the information we provide, or the reviews that appear on this website. We do not include the vast array of companies or financial offers that may be available to you. FG Trade/Getty Images
2 min read Published October 28, 2022
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Written by Bankrate Bankrate. This article was written with the help of automation technology, and then checked and edited 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 beginning of 2021. They are passionate about helping readers feel confident to control their finances by providing clear, well-researched information that is broken down into complicated topics into digestible pieces. Review by Mark Kantrowtiz by Nationally acknowledged student financial aid expert Mark Kantrowitz is an expert on student financial aid including the FAFSA as well as 529 plans, scholarships, education tax benefits along with student loans. The Bankrate guarantee
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So, this compensation can affect the way, location and in what order items appear within listing categories and categories, unless it is prohibited by law. This is the case for our mortgage, home equity and other products for home loans. Other elements, such as our own website rules and whether the product is available within your area or at your self-selected credit score range may also influence the way and place products are listed on this website. Although we try to offer the most diverse selection of products, Bankrate does not include details about each credit or financial item or product. Co-signing and co-owning a car are two ways to approach applying for a with an additional borrower. In both cases the second borrower has to have enough credit and earnings to pay for this loan on their own. But each has benefits and drawbacks, dependent on what the parties are looking for. There are differences between co-signing and a co-owning a car A co-signer is an individual who is accountable for the repayment of the loan, but doesn’t have any legal ownership of the car. Co-owners have equal rights to it. Co-signing for a car loan in the case of an automobile co-signer, the co-signer is required to pay the monthly payments if the borrower isn’t able to pay these payments. This is a big decision to make and will . Benefits of cosigning on the car loan Assistance in to qualify: A co-signer is eligible apply for a car loan that they would otherwise not be eligible for. Build credit In the event that the borrower is able to keep up with payments, the credit score of both the primary borrower and co-signer could be impacted positively. Reduce cost: If the co-signer is a good to excellent credit score and the primary borrower is in good standing, they can get a better cost of interest and charges. There are risks associated with co-signing for the car loan Responsibility for payments If the borrower fails to pay, the co-signer is in charge of all loan payments. There is no legal claim Co-signers are not on the title and does not have any legal right to the vehicle. Co-owning a car In the case of a vehicle, both the owner and co-owners are listed as co-owners on the title. The fact that a co-owner is listed doesn’t change what is already clear that the principal borrower is the owner of the property. Based on the way in which the vehicle is titled, the primary borrower may need permission before they can sell the car. Benefits of owning a car with a co-owner Safety for co-owner A co-borrower is protected by the security of having their name on the title. Greater terms: If the two of the borrowers have good credit scores, the primary borrower may get better terms than if they applied alone. There are risks associated with co-owning a car. equal right: A co-borrower is granted equal rights to the car 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 make use of the vehicle, they will likely need to be covered by an insurance plan. This could mean more expensive costs for both involved. How to choose between co-signing and co-owning the car. The primary difference between co-borrowers and co-signers is the level of investment on the loan. Co-borrowers take on more responsibility and ownership than co-signers. Co-borrowing is best for people who both have excellent credit scores and wish to have equal rights to the vehicle -for example, an engaged couple who wish to purchase a car together. However, it is not recommended co-borrowing is for those who isn’t eligible for the loan in the first place, or requires assistance in obtaining more money or a lower interest rates. How do you prepare to co-sign or co-own a vehicle To become a co-signer on a loan you must be able to prove a steady income and be able to meet the credit score requirement set for you by your lender. This is the same for co-ownership, as the credit of both borrowers will be taken into consideration. If you do meet the criteria, an open discussion should be held between the two parties. Co-signing and co-owning both come with substantial credit risk. You must ensure that there is an arrangement in place in case the borrower who is primary will not be able to pay. The bottom line There are many reasons you may choose to co-sign or purchase the car with another individual. In any case it is essential to ensure that the two parties on the same page about the nature of their relationship and what is expected from both of you. Learn more
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Written by The article was created using automated technology and thoroughly edited and fact-checked by an editor on our editorial team. Editor: Rhys Subitch Edited by Auto loans Editor Rhys has been writing and editing for Bankrate since the end of 2021. They are enthusiastic about helping readers gain the confidence to manage their finances by providing clear, well-researched details that cut otherwise complex topics into manageable bites.
Auto loans editor
Reviewed by Mark K. Kantrowitz Reviewed by Nationally acknowledged Student Financial Aid expert Mark Kantrowitz is an expert on student financial aid and the FAFSA as well as scholarships, 529 plans, education tax benefits and student loans.
Nationally recognized student financial aid expert
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