Co-signing vs. co-ownership of a vehicle: What’s the difference? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial choices by offering interactive financial calculators and tools, publishing original and objective content, by enabling you 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 offers that appear on this site are from companies that compensate us. This compensation may impact how and when products are featured on the site, such as, for example, the sequence in which they be listed within the categories of listing, except where prohibited by law for our mortgage or home equity products, as well as other products for home loans. But this compensation does affect the content we publish or the reviews that appear on this website. We do not contain the universe of companies or financial offerings that might be accessible to you. FG Trade/Getty Images
2 minutes read. Published 28 October 2022
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Written by Bankrate The article was created by using automated technology. It was then thoroughly edited and fact-checked by an editor from our editorial team. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are committed to helping readers gain the confidence to control their finances by providing clear, well-researched facts that break down complicated topics into digestible pieces. Review by Mark Kantrowtiz by Nationally recognized expert in student financial aid Mark Kantrowitz is an expert on student financial aid, the FAFSA, 529 plans, scholarships, educational tax benefits, along with student loans. The Bankrate promises
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We are compensated in exchange for the placement of sponsored products and, services, or by you clicking on specific links on our website. This compensation could impact how, where and when products are listed, except where prohibited by law for our mortgage, home equity and other home loan products. Other elements, such as our own rules for our website and whether the product is available within your region or within your self-selected credit score range can also impact the way and place products are listed on this website. Although we try to offer a wide range offers, Bankrate does not include information about every credit or financial item or product. Co-signing for a car and co-owning it are two different methods of requesting co-signing with a second borrower. In both instances the second borrower has to have enough credit and income to be able to fund their loan by themselves. Each has advantages and drawbacks, depending on what both parties want. The distinctions between a co-signing or co-owning of vehicle. A co-signer is a person who is equally accountable for the repayment of the loan but does not have any legal ownership of the car. Co-owners have equal rights to the vehicle. Co-signing the purchase of a car loan If it’s an automobile co-signer, the co-signer is required to make monthly repayments if the borrower isn’t able to pay them. This is a big decision that must be made and it will . Benefits of co-signing on a car loan Help qualifying: A co-signer can apply for the car loan which they wouldn’t otherwise be eligible for. Build credit: When the principal borrower can remain on top of their payments, the credit score of both the primary borrower and co-signer may be improved. Reduce cost: If the co-signer has a good or excellent credit score and the primary borrower is in good standing, they can be eligible for a lower cost of interest and charges. 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 payments. There is no legal claim Co-signers are not listed on the title and does not have any legal right to the vehicle. Co-owning a car in the case of a vehicle, both the owner as well as the co-owner are listed in the document. 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 titled and the primary borrower might require permission to sell the vehicle. Benefits of owning a car with a co-owner Security for the co-owners A co-borrower is protected by the security by having their own name on the title. Better terms: If both of the borrowers have good credit the primary borrower could be extended better terms than if they applied independently. The risks of co-owning a vehicle Equal right: A co-borrower is granted the same rights to the vehicle as the primary borrower. This means the co-owner must participate in either the transfer or sale of the car. Insurance: Even if the co-owner does not utilize the vehicle the car, they’ll likely have to be on an insurance plan. This can mean higher costs for the two parties involved. What is the best way to decide between co-signing or co-owning an automobile The most significant difference between co-borrowers and co-signers is the level of investment of the loan. Co-borrowers take on more responsibility and responsibility than co-signers. Co-borrowing is a good option for people who have good credit and want equal rights to the car — such as an engaged couple who wish to buy 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 is in need of assistance to qualify for a larger amount or low interest. How to prepare for co-signing or co-own a car To be a co-signer for a loan you must have a stable income and be able to meet the criteria for credit score that is set to be met by the lender. Similar requirements apply to being a co-owner because the credit of both the borrowers is being taken into consideration. Even if you meet the criteria, an open conversation should be had between both parties. Co-signing and co-owning both come with substantial credit risk. Make sure there is an arrangement in place for the event that the primary borrower can’t pay. The bottom line is that there are many reasons why you may choose to co-sign or co-own a car with another person. In any event it is essential for both of you to be on the same page regarding what their relationship is about and what’s expected of each of you. Find out more
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Written by The article was created using automated technology that was then thoroughly edited and checked by an editor from our editorial staff. The article was edited by Rhys Subitch Editor: Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are committed to helping readers gain the confidence to take control of their finances through providing concise, well-researched and well-informed facts that break down otherwise complex topics into manageable bites.
Auto loans editor
Review by Mark Kantrowtiz by Nationally recognized student financial aid expert Mark Kantrowitz is an expert on student financial aid and the FAFSA as well as scholarships, 529 plans as well as tax benefits for education along with student loans.
Nationally recognized student financial aid expert
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