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 goal is to help you make better financial decisions by offering interactive financial calculators and tools, publishing original and objective content. This allows you to conduct your own research and compare information at no cost and 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 Make Money The offers that appear on this site are from companies who pay us. This compensation could affect how and when products are featured on the site, such as, for example, the order in which they appear within the listing categories in the event that they are not permitted by law. Our mortgage or home equity products, as well as other home lending products. This compensation, however, does have no impact on the information we provide, or the reviews that you see on this site. We do not include the entire universe of businesses or financial offers that may be open to you. FG Trade/Getty Images
2 minutes read. Published October 28, 2022
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Written by Bankrate This article was generated by using automated technology. It was then thoroughly edited and fact-checked by an editor from our editorial staff. The article was edited 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 gain the confidence to manage their finances through providing clear, well-researched facts that break down complicated subjects into bite-sized pieces. Review by Mark Kantrowtiz by Nationally recognized expert in student financial aid Mark Kantrowitz is an expert on financial aid for students, the FAFSA, 529 plans, scholarships, educational tax benefits, as well as student loans. The Bankrate promise
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Therefore, this compensation may impact how, where and when products are displayed within the categories of listing in the event that they are not permitted by law for our mortgage or home equity products, as well as other home loan products. Other factors, like our own website rules and whether a product is offered in your region or within your self-selected credit score range may also influence how and where products appear on this website. Although we try to offer the most diverse selection of products, Bankrate does not include details about every credit or financial item or product. Co-signing and co-owning a car are two ways to approach applying for the loan with an additional borrower. In both cases the second borrower has to have sufficient credit and earnings to pay for the loan on their own. However, each comes with advantages and drawbacks, dependent on what both parties are looking for. There are differences between co-signing and a co-owning vehicle. A co-signer is someone who is responsible for repaying the loan, but doesn't have any legal ownership of the vehicle. Co-owners have equal rights towards it. Co-signing on the purchase of a car loan in the case of a car co-signer, they agree to take on the monthly payments if the borrower isn't able to pay these payments. It's a huge choice to make and could be . Benefits of co-signing on an auto loan Help getting a loan: A co-signer may be eligible get the car loan which they wouldn't otherwise be qualified for. Credit building: When the principal borrower is able to stay on top of payments, the credit of each primary lender and co-signer could be impacted positively. Reduce costs: If the cosigner is a good to good credit score, the primary borrower can be eligible for a lower cost of interest and charges. There are risks associated with co-signing for the car loan The responsibility for repayments: If the borrower defaults, the co-signer is accountable for the entire loan payments. There is no legal claim The co-signer isn't in the title of the car and has no legal rights to the vehicle. Co-ownership of a vehicle In the instance of a car both the owner and the co-owner are listed on the title. Co-ownership doesn't alter what is already clear that the principal borrower owns the property. Based on the way in which the vehicle is titled or registered, the primary borrower could require permission to sell the vehicle. Benefits of owning a car with a co-owner Co-owners are safer: The co-borrower has the safety that their names are on the title. Greater terms: If the two borrowers have good credit the primary borrower could get more favorable terms than if they applied alone. Risks of co-owning a car Equal Rights: Each co-borrower has equal rights to the car as the primary borrower. The co-owner is required to be involved in the sale or transfer of the car. Insurance: Even if co-owners don't actually use the car it is likely that they need to be covered by an insurance plan. This means higher cost for both concerned. How to choose between co-signing or co-owning the car. The primary difference between co-borrowers and co-signers is the level of investment on the loan. Co-borrowers have more responsibility and control over the loan than cosigners. Co-borrowing is ideal for those who both have excellent credit scores and wish to have equal rights to the vehicle -- such as couples who want to purchase a vehicle together. However, it is not recommended it is a good option for someone who isn't eligible for the loan even if they is in need of assistance to qualify for more money or a lower interest rates. How do you prepare to co-sign or co-own a vehicle To be a co-signer on an loan it is necessary to have a stable income and meet the credit score requirement that is set for you by your lender. Similar requirements apply to being a co-owner because the credit of both borrowers will be assessed. 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. Make sure there is an arrangement in place for the event that the principal borrower is unable to pay. The main point is that there are many reasons why you could choose to co-sign an automobile with a different person. In any event it is essential for both of you to be in agreement about what the relationship entails and what expectations are expected of both of you. Learn more
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Written by This article was generated using automation technology and was thoroughly checked for accuracy and quality by an editor on our editorial staff. Edited by Rhys Subitch Edited by Auto loans Editor Rhys has been editing and writing for Bankrate since late 2021. They are committed to helping readers gain confidence to manage their finances by providing precise, well-studied facts that break down complicated subjects into bite-sized pieces.
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Reviewed by Mark Kantrowtiz Reviewed by Nationally known experts on student aid Mark Kantrowitz is an expert on student financial aid including the FAFSA, 529 plans, scholarships educational tax benefits, and student loans.
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