Co-signing as opposed to. co-owning a car: 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 offering interactive tools and financial calculators as well as publishing objective and original content. We also allow users to conduct research and compare information at no cost – so that you can make sound financial decisions. Bankrate has partnerships with issuers such as, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make money The products that are advertised on this site come from companies that compensate us. This compensation could affect how and where products appear on this website, for example, for example, the order in which they may be listed within the categories of listing and other categories, unless prohibited by law for our mortgage or home equity products, as well as other products for home loans. This compensation, however, does affect the information we provide, or the reviews you read on this site. We do not cover the universe of companies or financial deals that could be available to you. FG Trade/Getty Images
2 min read Published 28 October 2022
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Written by Bankrate The article was created by using automated technology. It was then thoroughly verified and edited by an editor on our editorial team. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the beginning of 2021. They are committed to helping readers gain the confidence to control their finances through providing clear, well-researched facts that break down complex topics into manageable bites. Written by Mark Kantrowitz Reviewed by Nationally recognized expert on student financial aid Mark Kantrowitz is an expert on financial aid for students as well as the FAFSA as well as 529 plans, scholarships, education tax benefits as well as student loans. The Bankrate guarantee
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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 influence the manner, place and when products are listed in the event that they are not permitted by law. This is the case for our mortgage home equity, mortgage and other home loan products. Other elements, such as our own proprietary website rules and whether the product is available within your area or at your own personal credit score can also impact the way and place products are listed on this site. We strive to provide a wide range offers, Bankrate does not include information about every financial or credit item or product. Co-signing and co-owning a car are two different methods of requesting the loan with an additional borrower. In both cases the second borrower must to have a good credit score and income to support their loan independently. But each has benefits and drawbacks, depending on what both parties are looking for. The distinctions between a co-signing and a co-owning a car A co-signer is someone who is accountable for the repayment of the loan, but doesn’t own any legal rights to the car. A co-owner has equal claim towards it. Co-signing on an automobile loan in the case of an automobile co-signer, the co-signer is required to pay the monthly installments in the event that the borrower is unable to make the payments. It’s a huge choice to make and could be . Benefits of cosigning on the car loan Help getting a loan: A co-signer may be eligible apply for a car loan that they would otherwise not be eligible for. Credit building In the event that the borrower is able to remain on top of their payments, the credit score of co-signers as well as the co-signer can be positively affected. Reduce costs: If the co-signer is a good to excellent credit score the primary borrower will get a better interest rate and fees. There are risks associated with co-signing for a car loan The responsibility for repayments If the borrower fails to pay on a loan, the co-signer has the responsibility accountable for all loan payments. No legal claim The co-signer isn’t in the title of the car and has no legal claim to the car. Co-owning a car is a legal option. In the case of a car, both the owner and co-owner are as co-owners on the title. Having a co-owner doesn’t change what is already clear that the principal borrower owns the property. Depending on how the car is titled, the primary borrower may require permission to sell the vehicle. Benefits of co-owning a vehicle Security for the co-owners A co-borrower is protected by the safety that their names are listed on the title. More favorable terms: When both of the borrowers have good credit scores, the primary borrower may receive more favorable terms than if they applied alone. Risks of co-owning a car Equal rights: The co-borrower enjoys equal rights to the car as the principal borrower. The co-owner is required to take part in sale or transfer of the car. Insurance: Even if the co-owner doesn’t utilize the vehicle the car, they’ll likely have to be on an insurance plan. This could mean more expensive costs for the two parties involved. What is the best way to decide between co-signing or co-owning the car. The primary difference between co-borrowers and other co-signers is the level of investment of the loan. Co-borrowers have more responsibility and responsibility than co-signers. Co-borrowing is ideal for those who have good credit and want to share equal rights to the car -for example, a couple that wants to purchase a car together. However, it is not recommended a for a borrower who wouldn’t qualify for the loan in the first place, or requires assistance in obtaining an amount that is larger or with a lower interest rates. How to prepare to co-sign or co-own a vehicle To become a co-signer on the loan you must be able to prove a steady income and meet the requirements for credit scores that is set for you by your lender. This is the same for co-ownership, as the credit of both borrowers is assessed. Even if you satisfy the requirements, an open conversation should be had between the two parties. Co-signing and co-owning both come with significant credit risk. Be sure to have an arrangement in place for the event that the primary borrower can’t pay. The main point is that there are a variety of reasons why you could choose to co-sign a car with another person. In either case it is crucial that both parties are on the same page regarding what the relationship entails and what is expected from both of you. Find out more
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The article was written by produced using automated technology, that was then thoroughly edited and checked by an editor from our editorial team. Editor: Rhys Subitch The article was edited by Auto loans editor Rhys has been writing and editing for Bankrate from late 2021. They are passionate about helping readers gain confidence to take control of their finances through providing clear, well-researched facts that break down otherwise complicated subjects into bite-sized pieces.
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Review by Mark Kantrowtiz by Nationally known experts on student aid Mark Kantrowitz is an expert on student financial aid and the FAFSA as well as scholarships, 529 plans educational tax benefits, and student loans.
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