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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 mission is to help you make better financial choices by providing you with interactive tools and financial calculators that provide objective and unique content, by enabling you to conduct research and compare information for free – so that you can make sound financial decisions. Bankrate has partnerships 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 who pay us. This compensation could affect how and when products are featured on the site, such as, 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 loan products. However, this compensation will have no impact on the information we publish, or the reviews that you see on this site. We do not include the entire universe of businesses or financial offers that may be open 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 with the help of automation technology, and then verified and edited by an editor from our editorial staff. Edited 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 take control of their finances by providing precise, well-researched, and well-documented facts that break down complicated subjects into bite-sized pieces. Written by Mark Kantrowitz Reviewed by Nationally recognized expert on student financial aid Mark Kantrowitz is an expert on financial aid for students including the FAFSA, 529 plans, scholarships, tax benefits for education along with student loans. The Bankrate promise

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We are compensated in exchange for the placement of sponsored products and, services, or when you click on specific links on our site. This compensation could impact how, where and in what order items are displayed within the categories of listing in the event that they are not permitted by law for our mortgage home equity, mortgage and other home lending products. Other elements, such as our own website rules and whether the product is offered in the area you reside in or is within your own personal credit score could also affect the way and place products are listed on this site. Although we try to offer a wide range offers, Bankrate does not include details about every financial or credit item or product. Co-signing and co-owning cars are two different ways to approach applying for a with an additional borrower. In both cases the second borrower must to have sufficient credit and earnings to pay for the loan independently. But each has benefits and drawbacks, depending on what both parties are looking for. The distinctions between a co-signing and a co-owning a car A co-signer is a person who is equally responsible for repaying the loan, but doesn’t possess any legal title to the vehicle. A co-owner has equal claim to the vehicle. Co-signing on an automobile loan In the case of a car co-signer, they agree to take on the monthly repayments if the borrower can’t make the payments. This is a major decision that must be made and it will . Benefits of co-signing on an auto loan Assistance in getting a loan: A co-signer may be eligible apply for the car loan which they wouldn’t otherwise be qualified for. Improve credit score When the principal borrower can stay on top of payments, the credit of co-signers as well as the co-signer may be improved. Reduce cost: If the co-signer is a good to excellent credit score the primary borrower will get a better cost of interest and charges. The risks of co-signing the car loan Responsibility for payments: If the borrower defaults on a loan, the co-signer has the responsibility for all loan payments. No legal claim Co-signers are not listed on the title and has no legal rights to the car. Co-ownership of a vehicle In the case of a car, both the owner and co-owner are as co-owners on the title. Co-ownership doesn’t alter any fact about the reality that the borrower who is the main one is the owner of the property. If the car is titled and the primary borrower might require permission to sell the vehicle. Benefits of co-owning a vehicle Security for the co-owners A co-borrower is protected by the security by having their own name listed on the title. More favorable terms: When both borrowers have strong credit the primary borrower could be extended more favorable conditions than if they were applying alone. There are risks associated with co-owning a car. equal right: A co-borrower enjoys equal rights to the car as the primary borrower. The co-owner is required to participate in either the sale or transfer of the vehicle. Insurance If co-owners don’t actually make use of the vehicle, they will likely need to be covered by an insurance plan. This could mean more expensive costs for everyone affected. What is the best way to decide between co-signing and owning a car The main difference between co-borrowers and co-signers is the level of risk in the loan. Co-borrowers take on more responsibility and responsibility than co-signers. Co-borrowing is a good option for people who both have excellent credit scores and wish to have equal rights to the vehicle -for example, an engaged couple who wish to buy a car together. On the other hand, co-borrowing is for those who wouldn’t qualify for the loan even if they requires assistance in obtaining an amount that is larger or with a low interest. How to prepare for co-signing or co-own a vehicle To be a co-signer for an loan you must be able to prove a steady income and meet the criteria for credit score that is set for you by your lender. Similar requirements apply to being a co-owner because the credit of both borrowers will be considered. Even if you meet the requirements, a candid dialogue should be conducted between both parties. Co-signing and co-owning both come with significant risk to credit. 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 or purchase a car with another person. In any case it is essential for both of you to be in agreement about what their relationship is about and what expectations are expected of each of you. Find out more

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The article was written by generated using automation technology that was then thoroughly edited and checked by an editor on our editorial staff. The article was 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 control their finances by providing clear, well-researched facts that break down complex topics into manageable bites.

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Review by Mark Kantrowtiz by Nationally known experts on student aid Mark Kantrowitz is an expert on student financial aid including the FAFSA, scholarships, 529 plans, education tax benefits as well as student loans.

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