Co-signing vs. co-owning a vehicle: What’s the difference? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive financial calculators and tools that provide objective and unique content. This allows you to conduct your own research and compare information at no cost – so that you can make financial decisions with confidence. Bankrate has partnerships with issuers including, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make money The products that appear on this site come from companies who pay us. This compensation could affect how and where products are displayed on the site, such as for instance, the sequence in which they appear in the listing categories, except where prohibited by law. This applies to our loan products, such as mortgages and home equity, or other products for home loans. However, this compensation will not influence the information we publish, or the reviews that appear on this website. We do not contain the universe of companies or financial offers that may be available to you. FG Trade/Getty Images
2 minutes read. Published 28 October 2022
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Written by Bankrate The article was created using automation technology and thoroughly edited and fact-checked by an editor from our editorial staff. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the beginning of 2021. They are passionate about helping readers feel confident to manage their finances by providing clear, well-researched facts that break down complicated topics into digestible pieces. Written by Mark Kantrowtiz and reviewed by Nationally recognized expert in student financial aid Mark Kantrowitz is an expert on student financial aid including the FAFSA as well as 529 plans, scholarships educational tax benefits, as well as 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 specific links that are posted on our site. This compensation could influence the manner, place and in what order products are displayed within the categories of listing in the event that they are not permitted by law. We also offer 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 area or at your self-selected credit score range can also impact the way and place products are listed on this site. We strive to offer a wide range offers, Bankrate does not include details about each credit or financial products or services. Co-signing for a car and co-owning it are two approaches to applying for a with an additional borrower. In both cases, the secondary borrower needs to have sufficient credit and income to support the loan by themselves. However, each comes with advantages and drawbacks, depending on what both parties are seeking. There are differences between co-signing and a co-owning car. A co-signer a person who is equally accountable for the repayment of the loan, but doesn’t own any legal rights to the vehicle. Co-owners have equal rights to it. Co-signing on an automobile loan in the case of a car co-signer, they agree to pay the monthly installments in the event that the borrower isn’t able to pay these payments. It’s a huge choice to make and could be . Benefits of cosigning on an auto loan Assistance in to qualify: A co-signer is eligible for a car loan that they would otherwise not be eligible for. Improve credit score In the event that the borrower can stay on top of payments, the credit of co-signers and co-signer could be impacted positively. Reduce costs: If the co-signer has a very good to good credit score and the primary borrower is in good standing, they can be eligible for a lower cost of interest and charges. Risks of co-signing on an auto loan Responsibility for payments In the event that the borrower is in default on a loan, the co-signer has the responsibility for all loan repayments. There is no legal claim co-signer does not appear in the title of the car and does not have any legal right to the vehicle. Co-ownership of a car is a legal option. In the case of a car, both the owner and the co-owner are in the document. Having a co-owner doesn’t change the fact that the primary borrower owns the property. Based on the way in which the vehicle is titled, the primary borrower may need permission before they can sell the vehicle. Benefits of co-owning a car Co-owners are safer: The co-borrower has the security of having their name listed on the title. More favorable terms: When both of the borrowers have good credit the primary borrower might receive better terms than if they had applied alone. The risks of co-owning a vehicle equal Rights: Each co-borrower enjoys equal rights to the car as the primary borrower. This means the co-owner must be involved in the transfer or sale of the vehicle. Insurance: Even if the co-owner does not use the car, they’ll likely have to be covered by the insurance policy. This could mean more expensive costs for both concerned. How to choose between co-signing and co-owning an automobile The most significant distinction between co-signers and co-borrowers is the level of investment of the loan. Co-borrowers take on more responsibility and ownership than co-signers. Co-borrowing is a good option for those who have excellent credit scores and wish to have equal rights to the car — such as a couple that wants to purchase a car together. However, it is not recommended it is a good option for someone who isn’t eligible for the loan at all, or needs help qualifying for an amount that is larger or with a low interest. How do you prepare yourself to co-sign or purchase a car To be a co-signer on a loan it is necessary to have a steady income and meet the requirements for credit scores that is set by the lender. Similar requirements apply to being a co-owner, because the credit score of both people who are borrowing is taken into consideration. Even if you satisfy the criteria, an open dialogue should be conducted between the two parties. Co-signing or co-owning each comes with substantial credit risk. Be sure to have an insurance plan to cover the case that the principal borrower is unable to pay. The bottom line There are a variety of reasons why you may choose to co-sign or purchase a car with another person. In either case it is essential for both of you to be on the same page about what the relationship entails and what expectations are expected of each of you. Find out more
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The article was written by produced using automation technology, that was then thoroughly edited and checked by an editor on our editorial team. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are enthusiastic about helping readers gain the confidence to take control of their finances through providing precise, well-researched and well-researched information that breaks down otherwise complex subjects into bite-sized pieces.
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Reviewed by Mark K. Kantrowitz Reviewed by Nationally known student expert in financial aid Mark Kantrowitz is an expert on financial aid for students and the FAFSA and scholarships, 529 plans as well as tax benefits for education as well as student loans.
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