Co-signing as opposed to. co-owning a car How do you tell the differences? 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 financial calculators and tools as well as publishing objective and original content. This allows users to conduct research and compare information at no cost - so that you can make informed 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 can affect the way and where products appear on the site, such as, for example, the sequence in which they appear within the listing categories, except where prohibited by law for our mortgage home equity, mortgage and other home loan products. However, this compensation will affect the information we provide, or the reviews that you read on this site. We do not contain the vast array of companies or financial offerings that might be open to you. FG Trade/Getty Images
2 minutes read. Published October 28, 2022
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Written by Bankrate Written by This article was generated using automation technology and thoroughly checked and edited by an editor from our editorial staff. The article was 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 the confidence to manage their finances. They provide precise, well-researched, and well-documented facts that break down complicated subjects into bite-sized pieces. Reviewed by Mark Kantrowtiz Reviewed by Nationally well-known expert on student financial aid Mark Kantrowitz is an expert on financial aid for students, the FAFSA as well as scholarships, 529 plans, tax benefits for education as well as student loans. The Bankrate guarantee
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So, this compensation can affect the way, location and in what order products are listed, except where prohibited by law. This is the case for our mortgage, home equity and other products for home loans. Other factors, such as our own proprietary website rules and whether or not a product is available in the area you reside in or is within your own personal credit score could also affect the way and place products are listed on this website. Although we try to offer an array of offers, Bankrate does not include information about every credit or financial product or service. Co-signing for a car and co-owning it are two different approaches to applying for the loan with an additional borrower. In both cases the second borrower has to have enough credit and income to support this loan on their own. Each has advantages and drawbacks, depending on the kind of thing both parties are seeking. The differences between a 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 have any legal ownership of the car. Co-owners have equal rights to it. Co-signing the purchase of a car loan In the case of a car co-signer, the co-signer is required to take on the monthly repayments if the borrower can't make these payments. This is a big decision that must be made and it will . Benefits of co-signing an auto loan Help getting a loan: A co-signer may be eligible get an auto loan which they wouldn't otherwise be eligible for. Build credit: If the primary borrower is able to keep up with payments, the credit of each primary lender and co-signer could be impacted positively. Reduce costs: If the co-signer is a good to excellent credit score the primary borrower will get a better fee and interest rate. There are risks associated with co-signing for an auto loan The responsibility for repayments: If the borrower defaults, the co-signer is in charge of the entire loan repayments. There is no legal claim Co-signers are not listed on the title and has no legal claim to the car. Co-owning a car In the case of a car, both the owner as well as the co-owner are on the title. Co-ownership doesn't alter what is already clear that the principal borrower has the title to the property. Depending on how the car is named or registered, the primary borrower could require permission to sell the car. Benefits of co-owning a vehicle Security for the co-owners: The co-borrower has the safety that their names are on the title. Greater terms: If the two borrowers have strong credit, the primary borrower may be extended more favorable terms than if they had applied alone. There are risks associated with co-owning a car. Equal Rights: Each co-borrower enjoys equal rights to the car as the primary borrower. The co-owner is required to participate in either the sale or transfer of the vehicle. Insurance If the co-owner doesn't use the car it is likely that they need to be on the insurance policy. This could mean more expensive costs for both affected. The best option is to choose between co-signing and owning a car The main difference between co-borrowers and co-signers is the level of investment on the loan. Co-borrowers are more accountable and have greater ownership than co-signers. Co-borrowing is ideal for those who both have good credit and want to share equal rights to the vehiclelike couples who want to buy a car together. However, it is not recommended co-borrowing is for those who isn't eligible for the loan in the first place, or needs help qualifying for more money or a lower interest rate. How to prepare for co-signing or co-own a vehicle To be a co-signer on a loan it is necessary to be able to prove a steady income and meet the credit score requirement established for you by your lender. This is the same for co-ownership, as the credit score of both borrowers is being considered. If you do meet the requirements, a candid conversation should be had between the two parties. Co-signing and co-owning both come with substantial credit risk. Make sure there is an insurance plan to cover the case that the borrower who is primary will not be able to pay. The bottom line is that there are many reasons why you might want to co-sign or co-own a car with another person. In any event it is essential that both parties are on the same page about the nature of their relationship and what is expected from both of you. Find out more
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Written by This article was generated using automation technology that was then thoroughly edited and checked by an editor from our editorial team. Editor: 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 confidence to manage their finances with precise, well-studied information that breaks down otherwise complicated topics into digestible 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 including the FAFSA as well as 529 plans, scholarships as well as tax benefits for education along with student loans.
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