While the terms cosigner and co-buyer may sound the same, they mean very different things. Both cosigners and co-buyers can help you qualify for a car loan, but in distinct ways. Learning the differences between the two can help you determine which one is right for your situation.
Cosigner and Co-Buyer Similarities and Responsibilities
Cosigners and co-buyers (also called co-borrowers) have to sign the loan along with a primary borrower. This makes them legally obligated to it.
Both cosigners and co-borrowers provide an auto lender with more peace of mind. They act as a backup in case something goes wrong with the loan, such as the primary borrower not making their monthly payment.
The similarities don’t end there. Here are a few other things cosigners and co-buyers have in common:
- Lenders look at the credit scores and credit reports of both cosigners and co-borrowers to qualify them. This means they have to be able to meet the lender's credit requirements.
- Since cosigners and co-buyers are listed on the loan contract along with the primary borrower, they have to be present to sign the loan contract.
- Both cosigners and co-borrowers put their credit on the line for a primary borrower. Anything that happens with the loan, be it positive or negative, impacts the credit of both the primary borrower and the cosigner or co-buyer. Keep in mind that people with good credit typically take a bigger hit to their credit score as a result of a negative event.
- If the primary borrower doesn't make a payment, the lender can come to the cosigner or co-borrower for any back payment(s). If the loan goes into default, they can even be subject to collection efforts by a lender.
Key Differences between Cosigners and Co-Buyers
Even with all of the similarities shared by both cosigners and co-buyers, each plays a distinct role in helping a primary borrower get a bad credit car loan.
A cosigner’s key role in helping a primary borrower get an auto loan is a matter of credit. For example, if you have poor credit, a lender may require you to have a cosigner on the loan.
The purpose of a cosigner is to attach their good credit to a loan to help a primary borrower get approved. Therefore, having a good credit score is a cosigner requirement. Other than that, and agreeing to make payments if the primary borrower can’t, a cosigner doesn’t have any additional involvement.
Cosigners can be friends, coworkers, family members, or anyone else the primary borrower feels comfortably asking. They aren’t listed on the vehicle's title, and they must meet all of the lender's qualifications (minimum income, debt to income, payment to income, etc.) separately.
A co-borrower, on the other hand, can a help a primary borrower who can't qualify due to income. Co-buyers that are spouses can combine incomes with a primary borrower to help them meet the lender's income requirements. This means the primary borrower and co-borrower qualify for a loan together, so neither needs to meet the lender's requirements on their own.
When primary borrowers add a co-buyer to a car loan, their name also appears on the vehicle's title, and they share equal rights to both the car and the loan.
Get the Bad Credit Auto Loan You Need
As you can see, both cosigners and co-borrowers play different roles in helping you get a bad credit auto loan. Regardless of whether you need a cosigner or a co-buyer, one thing is certain: you have to work with the right type of lender to get approved.
At Auto Credit Express, we know where to go to find the special finance dealerships that have the lenders available to help people that are struggling with bad credit, no credit, or even bankruptcy.
We'll work to connect you with a dealer in your area if you fill out our easy, no-obligation car loan request form. What are you waiting for? Get started right now!