Co-signing as opposed to. co-owning a vehicle: 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, by enabling you to conduct research and compare data for free to help you make financial decisions with confidence. Bankrate has partnerships with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The deals that are displayed 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, except where prohibited by law. This applies to our loan products, such as mortgages and home equity, and other home lending products. But this compensation does not influence the information we publish, or the reviews you read on this site. We do not cover the vast array of companies or financial deals that could be available to you. FG Trade/Getty Images
2 min read Published October 28, 2022
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Written by Bankrate Written by The article was created using automation technology and thoroughly edited and fact-checked 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 the beginning of 2021. They are passionate about helping readers to manage their finances through providing clear, well-researched facts that break down complex subjects into bite-sized pieces. Review by Mark Kantrowtiz by Nationally well-known expert in student financial aid Mark Kantrowitz is an expert on financial aid for students including the FAFSA and scholarships, 529 plans, educational tax benefits, as well as student loans. The Bankrate promise
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We receive compensation for the placement of sponsored products and services or through you clicking certain links posted on our site. Therefore, this compensation may impact how, where and in what order items are listed in the event that they are not permitted by law. We also offer mortgage, home equity and other home loan products. Other factors, like our own website rules and whether a product is available within your region or within your self-selected credit score range can also impact how and where products appear on this site. Although we try to offer the most diverse selection of products, 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 another borrower. In both cases the second borrower has to have a good credit score and income to support the loan independently. However, each comes with advantages and drawbacks, based on the kind of thing both parties are looking for. There are differences between co-signing and co-owning car. A co-signer a person who is equally responsible for paying off the loan but does not have any legal ownership of the car. Co-owners have equal rights to the vehicle. Co-signing for a car loan in the case of an automobile co-signer, they agree to take on the monthly payments if the borrower is unable to make the payments. This is a major decision that must be made and it will . Benefits of co-signing on a car loan Assistance in to qualify: A co-signer is eligible get the car loan which they wouldn't otherwise be qualified for. Build credit: In the event that the borrower is able to keep up with payments, the credit score of co-signers as well as the co-signer could be impacted positively. Reduce cost: If the co-signer is a good to excellent credit score, the primary borrower can be eligible for a lower interest rate and fees. There are risks associated with co-signing on the car loan Responsibility for payments: If the borrower defaults, the co-signer is for the entire loan repayments. Legally insolvent Co-signer: The co-signer isn't listed on the title and has no legal rights to the vehicle. Co-ownership of a car is a legal option. In the instance of a car both the owner and the co-owner are listed as co-owners on the title. Co-ownership doesn't alter what is already clear that the principal borrower is the owner of the property. Depending on how the car is registered and the primary borrower might require permission to sell the car. Benefits of co-owning a vehicle Security for the co-owners A co-borrower is protected by the protection of their name being on the title. Better terms: If both borrowers have strong credit the primary borrower might get better terms than if they applied independently. There are risks associated with co-owning a car. equal right: A co-borrower enjoys the same rights to the vehicle as the principal borrower. This means the co-owner must be involved in the transfer of the vehicle. Insurance If the co-owner doesn't actually use the car, they'll likely be required to sign the insurance policy. This could mean more expensive costs for everyone involved. How to choose between co-signing or co-owning an automobile The most significant 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 a good option for those who both have good credit and want equal rights to the car -for example, an engaged couple who wish to buy a car together. However, it is not recommended a for a borrower who wouldn't qualify for the loan in the first place, or is in need of assistance to qualify for more money or a lower interest rate. How to prepare to co-sign or purchase a car To be co-signer on an loan you must have a stable income and meet the credit score requirement set to be met by the lender. Similar requirements apply to being a co-owner because the credit of both co-borrowers is considered. If you do meet the requirements, an open dialogue should be conducted between the two parties. Co-signing or co-owning each comes with significant risk to credit. Be sure to have an insurance plan for the event 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 purchase the car with another individual. In any event it is essential for both of you to be on the same page about what the relationship entails and what is expected from each of you. Learn more
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The article was written by generated using automation technology that was then thoroughly edited and checked by an editor from our editorial team. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate from late 2021. They are dedicated to helping readers gain confidence to take control of their finances with precise, well-researched and well-researched information that is broken down into complicated topics into digestible 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 529 plans, scholarships educational tax benefits, along with student loans.
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