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How are a cosigner and a co-borrower different on a car loan?
I want to get a car loan, but my credit isn't great. My credit union said I should look for a cosigner or co-borrower, but I'm not sure what those terms mean. What's the difference?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Understanding the difference between a cosigner and a co-borrower is smart because they mean different things as far as who is responsible for the car,
car loan
, insurance policies, and other aspects of car ownership.The difference between a cosigner and a co-borrower is this:
- A cosigner is financially responsible for paying the loan but has no claim to the underlying asset (the car)
- A co-borrower is also financially responsible for paying the loan, but unlike a cosigner, they have a claim to the underlying asset
In either case, both cosigners and co-borrowers must go through a credit check to gain approval for a car loan.
Another major difference between the two is how your loan works. If you want to remove a cosigner, you simply have them fill out a cosigner release form. For co-borrowers, the process is far more difficult, and typically, you have to
refinance the car
to remove the co-borrower.If you have a co-borrower on your loan, you also need to add them to your car insurance policy. That’s when
Jerry
becomes your greatest ally. Sign up in minutes to compare quotes from dozens of different insurers so you’re always getting the best rate for your car, whether you get a cosigner or a co-borrower.View full answer
- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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