Co-signing vs. co-owning a vehicle: Which is better? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial decisions by offering interactive tools and financial calculators that provide objective and unique content. We also allow you to conduct research and compare information for free and help you 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 Make Money The deals that are displayed on this site are from companies who pay us. This compensation may impact how and where products are displayed on this site, including for instance, the sequence in which they be listed within the categories of listing, except where prohibited by law for our loan products, such as mortgages and home equity and other products for home loans. But this compensation does have no impact on the content we publish or the reviews appear on this website. We do not cover the vast array of companies or financial deals that could be available to you. FG Trade/Getty Images
2 minutes read. Published 28 October 2022
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Written by Bankrate Written by Bankrate. This article was written using automation technology and thoroughly verified and edited by an editor from our editorial team. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the beginning of 2021. They are committed to helping readers feel confident to manage their finances by providing concise, well-researched and clear 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 financial aid for students as well as the FAFSA and 529 plans, scholarships, educational tax benefits, as well as student loans. The Bankrate promises
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So, this compensation can influence the manner, place and in what order products appear within listing categories, except where prohibited by law. This is the case for our mortgage home equity, mortgage and other products for home loans. Other factors, like our own website rules and whether or not a product is available within the area you reside in or is within your personal credit score could also affect the manner in which products are featured on this site. Although we try to offer the most diverse selection of products, Bankrate does not include information about every financial or credit product or service. Co-signing and co-owning cars are two approaches to applying for a with an additional borrower. In both situations, the secondary borrower needs to have sufficient credit and earnings to pay for the loan on their own. However, each comes with advantages and drawbacks, based on the kind of thing both parties want. There are some differences between a co-signing or co-owning of car. A co-signer an individual who is responsible for repaying the loan but does not have any legal ownership of the car. Co-owners have equal rights to it. Co-signing on the purchase of a car loan In the case of a car co-signer, the co-signer is required to make monthly repayments if the borrower can’t make them. It’s a huge decision that must be made and it will . Benefits of co-signing on a car loan Assistance in qualifying: A co-signer can apply for an auto loan which they wouldn’t otherwise be eligible for. Build credit: In the event that the borrower can keep up with payment, the credit of co-signers as well as the co-signer could be impacted positively. Reduce costs: If the cosigner is a good to good credit score then 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 on a loan, the co-signer has the responsibility for all loan repayments. No legal claim: The co-signer is not listed on the title and does not have any legal right to the car. Co-ownership of a car is a legal option. In the case of a car, both the owner and the co-owner are on the title. The fact that a co-owner is listed doesn’t change the fact that the primary borrower has the title to the property. Based on the way in which the vehicle is registered and the primary borrower might require permission to sell the car. Benefits of co-owning a car Safety for co-owner A co-borrower is protected by the security of having their name listed on the title. Better terms: If both borrowers have credit that is strong the primary borrower could be extended better terms than if they applied alone. The risks of co-owning a vehicle Equal Rights: Each co-borrower is granted the same rights to the vehicle as the primary borrower. This means the co-owner must take part in transfer or sale of the car. Insurance: Even if the co-owner does not use the car, they will likely have to be covered by the insurance policy. This means higher cost for the two parties concerned. How to choose between co-signing and owning an automobile The most significant distinction between co-signers and co-borrowers is the amount of investment of the loan. Co-borrowers are more accountable and have greater control over the loan than cosigners. Co-borrowing is a good option for those with excellent credit scores and wish to have equal rights to the vehicle -like a couple that wants to buy a car together. However, it is not recommended co-borrowing is for those who doesn’t meet the requirements for the loan even if they is in need of assistance to qualify for a larger amount or low interest. How to prepare for co-signing or co-owning 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. The same is required for co-ownership, as the credit score of both co-borrowers is considered. If you do meet the requirements, an open dialogue should be conducted between the two parties. Co-signing and co-owning both come with significant credit risk. Make sure there is a plan in place in case the principal borrower is unable to pay. The bottom line There are many reasons you may choose to co-sign the car with another individual. In any event it is crucial that both parties are on the same page regarding what the relationship entails and what’s expected of each of you. Find out more
The article was written by produced using automation technology, and was thoroughly checked for accuracy and quality by an editor from our editorial team. Edited by Rhys Subitch 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 confidence to manage their finances through providing clear, well-researched information that breaks down complex topics into manageable bites.
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Reviewed by Mark K. Kantrowitz Reviewed by Nationally recognized student expert in financial aid Mark Kantrowitz is an expert on financial aid for students, the FAFSA, scholarships, 529 plans as well as tax benefits for education along with student loans.
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