Co-Sign vs. Joint Auto Loan

When another person apply for an auto loan, you have the choice between either co-signing on the loan or becoming a joint auto loan applicant. Depending on which option you choose, you can end up with very different results. The key to deciding which option is best for your situation depends on what you want to accomplish with the vehicle. Let’s take a look at the difference between co-signing and taking on a joint auto loan.

Co-signing for an Auto Loan

The option to co-sign for an auto loan was originally intended to assist a person who is having problems with their credit report and needs a financially responsible person to add security if the owner cannot make the payments. In other words, a co-signer can be legally responsible for making payments, but has no ownership right to the vehicle. This means if you want to seize the vehicle or demand auto insurance payments if wrecked, you have no right to do so as a co-signer. Your are simply lending your good credit to the borrower.

This option comes with a ton of risks and is usually not recommended unless you fully trust the person you’re co-signing with. If your intention is to actually take partnership in owning the vehicle, this option is not really appropriate.

Obtaining a Joint Auto Loan

If you become a joint applicant, you will be responsible for making payments and also have equal rights to the car’s use. In the previous option, you are not able to seize the vehicle or demand auto insurance payments, but  you can do all of these things with joint auto ownership. Ultimately, when it comes to co-signing versus not co-signing, if you have any interest at all in co-owning a vehicle or plan to take financial responsibility for a vehicle, it’s best to become a joint applicant rather than simply co-sign for it. If you don’t want to own the car and just want to help a family member or friend get a loan of their own, co-signing is the best option

Photo credit Chris Gladis