Co-signing vs. co-owning a car How do you tell the differences? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make smarter financial decisions by providing you with interactive tools and financial calculators as well as publishing objective and original content. This allows you to conduct your own research and compare information at no cost to help you make informed financial decisions. Bankrate has agreements with issuers such as, but not restricted 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 that pay us. This compensation could affect how and when products are featured on this site, including for instance, the sequence in which they be listed within the categories of listing in the event that they are not permitted by law. Our mortgage home equity, mortgage and other home lending products. However, this compensation will affect the information we provide, or the reviews you read on this site. We do not contain the entire universe of businesses or financial deals that could be open to you. FG Trade/Getty Images
2 min read published October 28, 2022
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Therefore, this compensation may influence the manner, place and when products are displayed within the categories of listing, except where prohibited by law for our mortgage or home equity products, as well as other home loan products. Other factors, such as our own proprietary website rules and whether or not a product is offered in the area you reside in or is within your own personal credit score may also influence the way and place products are listed on this site. We strive to provide a wide range offers, Bankrate does not include information about every financial or credit products or services. Co-signing for a car and co-owning it are two different approaches to applying for co-signing with a second borrower. In both cases the second borrower has to have enough credit and earnings to pay for this loan by themselves. Each has advantages and drawbacks, depending on the kind of thing both parties are looking for. There are differences between co-signing or co-owning of car. A co-signer someone who is responsible for repaying the loan however, they don’t possess any legal title to the car. Co-owners share the same rights towards it. Co-signing 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. This is a major decision to make and will . Benefits of cosigning on the car loan Assistance in qualifying: A co-signer can for a car loan that they would otherwise not be eligible for. Build credit In the event that the borrower can remain on top of their payment, the credit of co-signers as well as the co-signer may be improved. Reduce cost: If the co-signer is a good to good credit score, the primary borrower can qualify for a lower fee and interest rate. 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 in charge of the entire loan repayments. There is no legal claim The co-signer isn’t in the title of the car and has no legal rights to the car. Co-owning a car in the case of a vehicle, both the owner as well as the co-owners are listed as co-owners on the title. The fact that a co-owner is listed doesn’t change what is already clear that the principal borrower owns the property. If the car is registered and the primary borrower might require approval before they are able to sell the car. Benefits of owning a car with a co-owner Co-owners are safer A co-borrower is protected by the protection by having their own name listed on the title. Greater terms: If the two borrowers have good credit the primary borrower might get better terms than if they had applied alone. Risks of co-owning a car Equal right: A co-borrower enjoys the same rights to the vehicle as the primary borrower. This means that the co-owner has to be involved in the transfer or sale of the car. Insurance In the event that the co-owner doesn’t use the car it is likely that they need to be covered by an insurance plan. This could mean more expensive costs for both affected. The best option is to choose between co-signing and co-owning an automobile The most significant distinction between co-borrowers and co-signers is the level of investment on the loan. Co-borrowers are more accountable and have greater control over the loan than cosigners. Co-borrowing is best for people who have good credit and want to share equal rights to the vehicle- such as an engaged couple who wish to purchase a car together. On the other hand, co-borrowing is for those who doesn’t meet the requirements for the loan even if they needs help qualifying for more money or a lower interest rate. How to prepare to co-sign or co-own a car To be a co-signer for a loan it is necessary to be able to prove a steady income and meet the criteria for credit score established for you by your lender. The same is required for co-ownership, as the credit of both borrowers will be taken into consideration. Even if you satisfy the requirements, a candid dialogue should be conducted between the two parties. Co-signing and co-owning both come with significant risk to credit. Be sure to have a plan in place for the event that the principal borrower is unable to pay. The main point is that there are many reasons you could choose to co-sign or co-own an automobile with a different person. In either case, it is important for both of you to be on the same page about the nature of their relationship and what expectations are expected of both of you. Learn more
Written by The article was generated using automation technology and thoroughly edited and fact-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 passionate about helping readers gain the confidence to take control of their finances through providing concise, well-researched and well-informed facts that break down complicated topics into digestible pieces.
Auto loans editor
Reviewed by Mark Kantrowtiz Reviewed by Nationally known student financial aid expert Mark Kantrowitz is an expert on student financial aid, the FAFSA, 529 plans, scholarships, education tax benefits and student loans.
Nationally recognized student financial aid expert
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