Rights of the co-borrower on a car loan

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A car loan with two borrowers on the title is also called a solidarity car loan. You and your co-borrower share all financing rights and responsibilities, regardless of who drives the vehicle. Let’s see what it is and some solutions for any co-borrower scenarios that might arise.

Co-borrowers and their rights

A co-borrower is someone who takes out a car loan with another person, usually a spouse or domestic partner. In order to qualify for the loan, they use their combined income to meet the minimum income requirements of the lender. When you get a joint car loan, both co-borrowers are responsible for the loan payments and you are both listed as the vehicle’s co-owner on the title.

This means that you have the same rights to own and use the car, but you also share the responsibility that comes with owning the vehicle. The loan is also shown on both of your credit reports, although lenders typically only use the lower of your credit scores to qualify you for financing.

You usually only need a co-borrower for their income, but having one with a better credit rating than you can open up car loan possibilities such as shorter loan term, vehicle options. more expensive or a lower interest rate.

ACE tip: Remember that a co-borrower is not the same as a co-signer. Co-signers help you get a loan by lending you their good credit rating to help you meet the lender’s qualifications, but they have no legal rights to your vehicle.

Eligibility for a joint auto loan

In order for you and a co-borrower to qualify for financing, the lender combines your income amounts to meet the minimum income qualification. However, you usually both have to meet the other loan requirements individually.

This means that before you get the co-borrower rights that come with a car loan, you need to take responsibility for making sure you meet the basic loan requirements. These include:

  • Returned – This can be combined to meet the minimum lender requirements, which for bad credit lenders is typically at least $ 1,500 to $ 2,500 per month before taxes.
  • Residence – Most lenders require that you bring a current utility bill in your name or names to the address listed on the auto loan application.
  • Proof of a working phone – Lenders need to be able to contact both parties on a joint car loan, so you both need to prove that you have a cell phone or a landline. Prepaid cell phones don’t cut it off.
  • Valid driver’s license – Typically, you both need to be able to prove your identity with a valid driver’s license.
  • Personal references – You typically need to provide five to eight personal references each with complete information: full name, address, phone number, and email.

Who pays the loan?

When it comes to the responsibility of paying for the vehicle, insurance, maintenance, and daily driving costs, it’s between you and your co-borrower! However, be aware that no matter who you decide to pay what, a missed or late payment hurts both of your credit scores.

If you fall behind on the loan, a lender will not hesitate to sue both of you at the same time, since you are both responsible for the payments. The lender usually ignores which of you is footing the bill, just that it gets paid!

This is because you both share the ownership of the vehicle. If you both stop paying the car loan deal, the car is repossessed and you are still responsible for the deficit after you sell it, and your credit scores and reports reflect the damage. Repossessions stay on your credit report for seven years, so this isn’t the outcome you want.

But if…

  • … I want to get out of the loan? Getting out of a joint auto loan may require some cooperation. If you want to get out of the loan, it’s up to you to talk to your co-borrower and see how to proceed. If their income situation, or yours, has changed for the better, your co-borrower may be able to refinance the loan and remove you from the contract. However, if they still need the vehicle and are not eligible for financing on their own, you could be stuck in the contract until you can repay the loan.
  • … We divorce? It depends on whether you live in a community property state or in an equitable division state. In most cases, the assets that belonged to the condominium are sold and the profit from the sale is divided either 50/50 in a communal property state or as the judge sees fit in a fair share state.
  • … The car is totaled? If the vehicle is destroyed in an accident, both of you are still responsible for the remaining car loan balance once the insurance covers the current market value of the loan. If you and your co-borrower have insured the car with a GAP policy, you might not have to worry. GAP pays the difference between your loan balance and the value of the car if it is stolen or totaled while it is in a negative equity position.
  • … A co-borrower dies? Never something pleasant, the death of a loved one can often be a shock, and the last thing you need to worry about is unforeseen debt. Be aware that if you are a co-borrower and the other party on the loan has died, you are now responsible for the loan, even if they were the one making the payments before.
  • … I want to trade in the car? Again, to trade in a vehicle, you and your co-borrower usually need to sign the title and make it available for sale in most situations. Before you rush out of your old contract, make sure your income situation is up to par with your next car loan. If you don’t have the income to go it alone, you may also need to hire a co-borrower for your next loan.

Need your own financing?

Getting out of a joint auto loan with a co-borrower is like getting out of a loan yourself, unless the two of you are not on the same page. If you don’t agree on what should happen with the car, but own it freely, you can sell the vehicle privately and share the money. If you can’t at least come to terms with this, you may need to seek professional advice on the next steps to take.

Now that you know the rights and responsibilities of a co-borrower, you might be thinking twice about taking out a car loan solidarity. If you are just thinking of a co-borrower due to a poor credit situation, you may be able to use a co-signer instead, who has no ownership rights in the car. Or, you can try working with a subprime lender.

These lenders are ready to hire borrowers with unique credit situations, and we know where to find them. Here has Auto Express Credit, we have built a nationwide network of special finance dealers who are registered with them. Let us guide you to your next car loan by matching you with a local dealership. Simply fill out our fast, free, no-obligation auto loan application form and we’ll get to work!

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