Understanding Co-borrowers vs. Cosigners

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


, - March 13, 2018

The terms “co-borrower” and “cosigner” don’t mean the same thing. While both can help a borrower qualify for an auto loan, their roles differ during the process of taking one out.

Co-borrowers

A co-borrower, also called a joint applicant, is someone – usually a spouse – who applies along with another individual and shares the loan and ownership of the vehicle. Both borrowers need to meet the lender’s requirements (although spousal incomes can be added together), and a credit check will be run on both of them.

Being a co-borrower means both borrowers are equally responsible for payments and have equal rights to the car. Co-borrowing is great for buyers who want to take out a bigger loan than they’d normally be able to qualify for on their own. If one borrower falls through the cracks and declares bankruptcy, the joint applicant will be granted equal protection most of the time, which isn’t the case in a cosigning arrangement.

Cosigners

Typically a family member or close friend, a cosigner is someone who agrees to pay the loan in the event that the primary borrower is unable to. However, a cosigner doesn’t hold any ownership or rights to the vehicle.

Having a cosigner assures the lender that payments will be made on time each month, and is sometimes required when the primary borrower has subprime credit. When someone cosigns on a loan, their credit score and credit report will be affected. If the primary borrower fails to make payments, it damages both of their scores and any credit action taken will be recorded on both of their reports.

Bottom Line

Knowing whether you’ll need a co-borrower or cosigner is important during the auto loan process. While they may sound the same, co-borrowers are generally married couples and cosigners are close relatives or friends – with each having different rights and responsibilities.

If you're looking for an auto loan and are dealing with imperfect credit, CarsDirect wants to help you find financing. We work with a nationwide network of car dealerships that specialize in helping consumers dealing with credit issues. To get started, fill out our secure auto loan request form today.

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


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