Co-signing vs. co-owning a car: Which is better? 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 tools and financial calculators, publishing original and objective content. This allows you to conduct your own research and compare information for free and help you make sound 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 Make money The products that are advertised on this site come from companies who pay us. This compensation may impact how and where products appear on this site, including, for example, the sequence in which they appear within the listing categories in the event that they are not permitted by law. This applies to our mortgage or home equity products, as well as other home lending products. This compensation, however, does affect the information we provide, or the reviews that you see on this site. We do not contain the vast array of companies or financial offerings that might be available to you. FG Trade/Getty Images
2 min read published 28 October 2022
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Written by Bankrate Bankrate. This article was written by using automated technology. It was then thoroughly verified and edited 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 late 2021. They are passionate about helping readers gain the confidence to manage their finances by providing precise, well-researched, and well-documented information that is broken down into complicated subjects into bite-sized pieces. Review by Mark Kantrowtiz by Nationally recognized student financial aid expert Mark Kantrowitz is an expert on student financial aid as well as the FAFSA, scholarships, 529 plans, tax benefits for education as well as student loans. The Bankrate promises
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This compensation could affect the way, location and in what order products are displayed within the categories of listing, except where prohibited by law for our mortgage, home equity and other products for home loans. Other factors, such as our own rules for our website and whether a product is available in your area or at your own personal credit score can also impact how and where products appear on this website. We strive to provide the most diverse selection of products, Bankrate does not include information about every financial or credit product or service. Co-signing and co-owning a car are two different methods of requesting co-signing with a second borrower. In both instances the second borrower must to have a good credit score 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. The distinctions between a co-signing or co-owning of car. A co-signer a person who is equally responsible for repaying the loan however, they don't own any legal rights to the car. Co-owners share the same rights to it. Co-signing for the purchase of a car loan If it's an automobile, the co-signer agrees to take on the monthly repayments if the borrower is unable to make these payments. This is a major choice to make and could be . Benefits of co-signing a car loan Aid in qualifying: A co-signer can get an auto loan that they would otherwise not be eligible for. Credit building: In the event that the borrower is able to stay on top of payments, the credit score of each primary lender as well as the co-signer could be impacted positively. Reduce costs: If the co-signer has a very good to good credit score the primary borrower will be eligible for a lower fee and interest rate. Risks of co-signing on an auto loan Responsibility for payments In the event that the borrower is in default the co-signer will be responsible accountable for all loan repayments. There is no legal claim: The co-signer is not in the title of the car and has no legal claim to the vehicle. Co-owning a car in the instance of a car both the owner and co-owners are listed as co-owners on the title. Co-ownership doesn't alter the fact that the primary borrower has the title to the property. Based on the way in which the vehicle is named and the primary borrower might require permission to sell the car. Benefits of co-owning a car Security for the co-owners A co-borrower is protected by the safety of having their name listed on the title. Greater terms: If the two borrowers have strong credit, the primary borrower may be extended better terms than if they had applied alone. The risks of co-owning a vehicle equal rights: The co-borrower is granted the same rights to the vehicle as the principal borrower. The co-owner is required to participate in either the transfer or sale of the car. Insurance If the co-owner doesn't use the car, they will likely need to be covered by an insurance plan. This means higher cost for the two parties affected. What is the best way to decide between co-signing and co-owning a car The main difference between co-borrowers and other co-signers is the level of investment of the loan. Co-borrowers are more accountable and have greater control over the loan than cosigners. Co-borrowing is ideal for those who have good credit and want to share equal rights to the vehicle -like an engaged couple who wish to purchase a vehicle together. However, it is not recommended it is a good option for someone who isn't eligible for the loan in the first place, or is in need of assistance to qualify for a larger amount or low interest. How to prepare to co-sign or co-own a vehicle To be a co-signer on an loan, you'll need to be able to prove a steady income and be able to meet the credit score requirement that is set for you by your lender. The same is required for being a co-owner because the credit of both the borrowers will be taken into consideration. Even if you satisfy the criteria, an open discussion should be held between both parties. Co-signing or co-owning each comes with substantial credit risk. Make sure there is an arrangement in place in case the borrower who is primary will not be able to pay. The bottom line There are many reasons why you may choose to co-sign the car with another individual. In any case it is crucial that both parties are in agreement about what the relationship entails and what is expected from both of you. Learn more
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Written by The article was generated using automation technology that was then thoroughly edited and checked by an editor on our editorial team. The article was edited by Rhys Subitch The article was edited by Auto loans Editor Rhys has been editing and writing for Bankrate since the end of 2021. They are enthusiastic about helping readers gain the confidence to manage their finances by providing precise, well-studied facts that break down complex topics into manageable bites.
Auto loans editor
Reviewed by Mark Kantrowtiz Reviewed by Nationally acknowledged Student Financial Aid expert Mark Kantrowitz is an expert on student financial aid including the FAFSA, scholarships, 529 plans as well as tax benefits for education as well as student loans.
Nationally recognized student financial aid expert
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