Co-signing vs. co-owning a car: Which is better? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial decisions by offering interactive financial calculators and tools, publishing original and objective content, by enabling you to conduct research and compare information at no cost to help you make financial decisions with confidence. 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 offers that appear on this site come from companies who pay us. This compensation could affect how and where products appear on this site, including for instance, the order in which they appear in the listing categories, except where prohibited by law for our mortgage home equity, mortgage and other home lending products. But this compensation does affect the information we publish, or the reviews that appear on this website. We do not include the vast array of companies or financial offers that may be open to you. FG Trade/Getty Images
2 minutes 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 on our editorial team. 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 committed to helping readers feel confident to take control of their finances by providing precise, well-researched, and well-documented facts that break down complicated subjects into bite-sized pieces. Written by Mark Kantrowitz Reviewed by Nationally recognized expert in student financial aid Mark Kantrowitz is an expert on student financial aid as well as the FAFSA, 529 plans, scholarships, education tax benefits as well as student loans. The Bankrate promise
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Therefore, this compensation may influence the manner, place and in what order products appear within listing categories and categories, unless it is prohibited by law. We also offer mortgage, home equity and other home loan products. Other factors, such as our own website rules and whether a product is available within your region or within your personal credit score can also impact how and where products appear on this site. Although we try to offer an array of offers, Bankrate does not include information about every financial or credit product or service. Co-signing for a car and co-owning it are two different ways to approach applying for a with an additional borrower. In both instances the second borrower has to have sufficient credit and earnings to pay for their loan independently. However, each comes with advantages and drawbacks, dependent on what the parties want. The differences between a co-signing or co-owning of a car A co-signer is a person who is equally accountable for the repayment of the loan but does not have any legal ownership of the vehicle. Co-owners have equal rights to the vehicle. Co-signing an automobile loan In the case of an automobile co-signer, the co-signer is required to make monthly payments if the borrower is unable to make these payments. This is a big decision to make and will . Benefits of cosigning on a car loan Assistance in to qualify: A co-signer is eligible apply for a car loan they otherwise wouldn't be eligible for. Improve credit score In the event that the borrower is able to stay on top of payments, the credit score of co-signers as well as the co-signer can be positively affected. Reduce cost: If the co-signer has a good or excellent credit score and the primary borrower is in good standing, they can be eligible for a lower interest rate and fees. There are risks associated with co-signing for a car loan the responsibility for payment If the borrower fails to pay on a loan, the co-signer has the responsibility accountable for all loan payments. Legally insolvent: The co-signer is not in the title of the car and does not have any legal right to the car. Co-owning a car In the case of a vehicle, both the owner as well as the co-owner are listed as co-owners on the title. Co-ownership doesn't alter any fact about the reality that the borrower who is the main one is the owner of the property. If the car is titled, the primary borrower may require approval before they are able to sell the vehicle. Benefits of co-owning a car Security for the co-owners: The co-borrower has the protection that their names are listed on the title. Greater terms: If the two of the borrowers have strong credit the primary borrower could be extended better conditions than if they were applying alone. Risks of co-owning a car Equal right: A co-borrower enjoys equal rights to the car as the primary borrower. This means the co-owner must be involved in the sale or transfer of the car. Insurance In the event that the co-owner does not make use of the vehicle, they will likely need to be covered by an insurance plan. This means higher cost for everyone affected. What is the best way to decide between co-signing and co-owning a car The main 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 ideal for those with excellent credit scores and wish to have equal rights to the vehicle -- such as an engaged couple who wish 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 low interest. How to prepare to co-sign or co-own a vehicle To become a co-signer on the loan, you'll need to have a stable income and meet the credit score requirement that is set by the lender. Similar requirements apply to being a co-owner, because the credit score of both borrowers will be considered. Even if you meet the criteria, an open dialogue should be conducted between the two parties. Co-signing and co-owning both carry substantial credit risk. Make sure there is a plan in place in case the borrower who is primary will not be able to pay. The main point is that there are many reasons why you might want to co-sign or co-own a car with another person. In either case, it is important for both of you to be on the same page about what the relationship entails and what is expected from both of you. Find out more
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Written by The article was generated using automation technology and thoroughly edited and fact-checked by an editor on our editorial team. Editor: Rhys Subitch Editor: 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 through providing precise, well-studied information that breaks down complex topics into manageable bites.
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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 including the FAFSA, 529 plans, scholarships educational tax benefits, as well as student loans.
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