What is the difference between a co-signer and a co-buyer in a bad credit car loan?
Although the terms co-signer and co-buyer may sound the same, they mean very different things. Co-signers and co-buyers can help you get a car loan, but in separate ways. Learning the differences between the two can help you determine which one is right for your situation.
Similarities and Responsibilities of Co-Signer and Co-Buyer
Co-signers and co-purchasers (also called co-borrowers) must sign the loan with a primary borrower. This makes them legally obligated to do so.
Co-signers and co-borrowers provide the auto lender with greater peace of mind. They act as a backup in case something goes wrong with the loan, for example if the primary borrower doesn’t make their monthly payment.
The similarities don’t end there. Here are some more what co-signers and co-buyers have in common:
- Lenders review the credit scores and credit reports of co-signers and co-borrowers to qualify them. This means that they must be able to meet the lender’s credit requirements.
- Since co-signers and co-purchasers are listed on the loan agreement with the primary borrower, they must be present to sign the loan agreement.
- Co-signers and co-borrowers put their credit on the line for a primary borrower. Everything that happens with the loan, whether positive or negative, impacts the credit of both the primary borrower and the co-signer or co-purchaser. Keep in mind that people with good credit generally experience a greater impact on their credit score following a negative event.
- If the primary borrower fails to make a payment, the lender may go to the co-signer or co-borrower for any repayment back. If the loan goes into default, they may even be subject to collection efforts by a lender.
Key Differences Between Co-Signers and Co-Buyers
Even with all of the similarities shared by co-signers and co-buyers, each plays a distinct role in helping a primary borrower secure a bad credit car loan.
The key role of a co-signer in helping a primary borrower secure an auto loan is in credit. For example, if you have poor credit, a lender may require you to have a co-signer on the loan.
The purpose of a co-signer is to link their good credit to a loan to help a primary borrower get approved. Therefore, having a good credit rating is a co-signer requirement. Other than that, and by agreeing to make payments if the primary borrower cannot, a co-signer has no further involvement.
Co-signers can be friends, colleagues, family members, or anyone else the primary borrower feels comfortable asking. They are not listed on the vehicle title and must meet all lender qualifications (minimum income, debt on income, payment on income, etc.) separately.
A co-borrower, on the other hand, can help a primary borrower who cannot qualify due to income. Co-purchasers who are spouses can combine income with a primary borrower to help them meet the lender’s income requirements. This means that the primary borrower and the co-borrower qualify for a loan together, so neither need meet the lender’s requirements on their own.
When the main borrowers add a co-buyer to a car loan, their name also appears on the title of the vehicle, and they share equal rights to both the car and the loan.
Get the bad credit car loan you need
As you can see, co-signers and co-borrowers play different roles in helping you get a car loan with bad credit. Whether you need a co-signer or a co-buyer, one thing is certain: you need to work with the right kind of lender to get approved.
AT Auto Express Credit, we know where to go to find the special financing dealers who have the lenders available to help people struggling with bad credit, no credit, or even bankruptcy.
We’ll do our best to connect you with a dealership in your area if you complete our simple, no-obligation car loan application form. What are you waiting for? Start now!