Co-signing or. co-ownership of a vehicle: What’s the difference? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial choices by providing you with interactive tools and financial calculators as well as publishing objective and original content, by enabling you to conduct research and compare data for free to help you make sound financial decisions. Bankrate has agreements with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are displayed on this website are provided by companies that compensate us. This compensation may impact how and when products are featured on this site, including for instance, the order in which they may appear in the listing categories and other categories, unless prohibited by law. Our mortgage or home equity products, as well as other products for home loans. However, this compensation will not influence the information we publish, or the reviews you read on this site. We do not contain the vast array of companies or financial deals that could be open to you. FG Trade/Getty Images
2 min read published 28 October 2022
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Written by Bankrate Written by Bankrate. This article was written by using automated technology. It was then thoroughly edited and fact-checked by an editor from our editorial team. 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 to control their finances. They provide precise, well-researched, and well-documented information that is broken down into complicated topics into digestible pieces. Review by Mark Kantrowtiz by Nationally acknowledged expert in student financial aid Mark Kantrowitz is an expert on student financial aid as well as the FAFSA and 529 plans, scholarships, tax benefits for education and student loans. The Bankrate promise
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We are compensated in exchange for placement of sponsored products and services, or through you clicking certain links posted on our website. This compensation could impact how, where and in what order products are listed, except where prohibited by law for our mortgage or home equity products, as well as other home loan products. Other elements, such as 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 provide a wide range offers, Bankrate does not include specific information on each credit or financial item or product. Co-signing for a car and co-owning it are two different approaches to applying for the loan with an additional borrower. In both situations the second borrower must to have a good credit score and income to be able to fund the loan on their own. However, each comes with advantages and drawbacks, based on what the parties are looking for. There are differences between co-signing or co-owning of car. A co-signer a person who is equally responsible for paying off the loan, but doesn’t own any legal rights to the vehicle. Co-owners have equal rights to it. Co-signing for a car loan If it’s a car co-signer, they agree to make monthly payments if the borrower can’t make the payments. This is a major decision that must be made and it will . Benefits of co-signing an auto loan Help to qualify: A co-signer is eligible for a car loan that they would otherwise not be qualified for. Credit building If the primary borrower is able to keep up with payments, the credit score of both the primary borrower as well as the co-signer could be impacted positively. Reduce costs: If the cosigner is a good to excellent credit score the primary borrower will get a better interest rate and fees. Risks of co-signing on the car loan The responsibility for repayments If the borrower fails to pay the co-signer will be responsible for all loan repayments. No legal claim: The co-signer is not on the title and has no legal claim to the car. Co-owning a car is a legal option. In the instance of a car both the owner and the co-owner are listed in the document. Co-ownership doesn’t alter what is already clear that the principal borrower owns the property. Depending on how the car is registered, the primary borrower may require permission to sell the vehicle. Benefits of co-owning a car Safety for co-owner A co-borrower is protected by the protection of having their name on the title. Better terms: If both borrowers have good credit the primary borrower might receive more favorable terms than if they applied alone. Risks of co-owning a car Equal right: A 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 If the co-owner does not utilize the vehicle, they will likely need to be covered by the policy of insurance. This can mean higher costs for the two parties involved. What is the best way to decide between co-signing and owning the car. The primary difference between co-borrowers and other co-signers is the amount of money invested on the loan. Co-borrowers are more accountable and have greater control over the loan than cosigners. Co-borrowing is a good option for people with excellent credit scores and wish to have equal rights to the car — such as a couple that wants to buy a car together. On the other hand, it is a good option for someone who isn’t eligible for the loan in the first place, or is in need of assistance to qualify for a larger amount or low interest. How to prepare for co-signing or co-own a car To become a co-signer on the loan, you’ll need to have a stable income and meet the requirements for credit scores set to be met by the lender. The same is required for co-ownership, as the credit score of both borrowers is being taken into consideration. Even if you satisfy the criteria, an open discussion should be held between the two parties. Co-signing and co-owning both come with significant credit risk. You must ensure that there is a plan in place to cover the case that the principal borrower is unable to pay. The bottom line There are a variety of reasons why you could choose to co-sign an automobile with a different person. In either case it is crucial that both parties are on the same page regarding what their relationship is about and what expectations are expected of each of you. Learn more
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Written by This article was created using automated technology and was thoroughly checked for accuracy and quality by an editor on our editorial staff. The article was edited 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 gain the confidence to control their finances through providing clear, well-researched information that breaks down complicated subjects into bite-sized pieces.
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Reviewed by Mark K. Kantrowitz Reviewed by Nationally recognized experts on student aid Mark Kantrowitz is an expert on student financial aid, the FAFSA as well as 529 plans, scholarships educational tax benefits, along with student loans.
Nationally acknowledged expert in student financial aid
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