What’s the Difference Between a Cosigner and Guarantor?

Posted: Friday, December 28th, 2018

We all need help sometimes; and if you have poor credit, you may end up wondering about the differences of a guarantor vs. co-signer when it comes time to apply for an auto loan around St. Charles or Florissant. Co-signers and guarantors both help guarantee the loan, since they are also responsible for the loan if you fail to pay — but the ways in which they’re responsible are a bit different.

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What is a Co-signer?

A co-signer is as liable as the primary borrower for paying back the loan, meaning that both parties share equal responsibility. Typically, this option is best if your finances aren’t quite strong enough to deal with the loan on your own. The catch is that the lender has to review the credit histories of both you and your cosigner to approve the loan. With the finances of the cosigner calculated alongside your own, you may be eligible to borrow more money than you would be on your income alone.

What is a Guarantor?

A guarantor is very similar to a co-signer, but the nature of the liability for the loan is a little different.

If someone co-signs a loan and the primary borrower fails to make the payments, the lender may pursue both the primary borrower and the co-cosigner — the co-signer’s assets are at risk if the lender takes legal action. A guarantor, on the other hand, only becomes liable if the lender has pursued every avenue possible against the primary borrower. As such, there’s less risk for a guarantor than a cosigner, though a guarantor still shares liability.

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Car Loan FAQs

Do I Need a Co-Signer for a Car Loan?

No, you do not. However, a co-signer can be a huge help for those who aren’t strong candidates for an auto loan. If you have a lower credit score, if you are a first-time buyer, or if you have low income, then a co-signer can help you get a much better deal.

Does a Co-Signer Own the Car?

The co-signer is a partner in financing, but not ownership. They cannot take possession of your vehicle, even if they start making the payments themselves. That’s because their name is not usually on the title, and only the titleholder owns the vehicle.

Do I Need a Guarantor for Car Finance?

No, you do not. But like the co-signer, a guarantor strengthens your case to lenders if you are not a strong candidate for a car loan.

Who is Eligible to Be a Guarantor?

Almost anyone can become a guarantor who is over 21 years of age in good financial standing. You can ask a family member, a friend, or a spouse with a separate bank account. The important thing is that your guarantor is someone who you trust with a record of good financial stability.

What Do I Need to Co-sign a Car?

Any co-signer for a car will need the following:

  • A strong credit score: ideally at 700 or above.
  • The ability to make payments: lenders will look at the co-signer’s income to ensure they are able to step in and make payments for the car should the owner fail to do so. Pay stubs or tax returns are helpful documents here.
  • Proof of stability: some lenders may ask to see proof of residency or job security to help verify their standing, but this isn’t always necessary, especially with a good credit score.

Who Can Co-sign a Car for You?

Anyone you trust can co-sign a a car for you, though people typically choose a family member or loved one. Regardless of your relation, the person you choose should have a solid credit history with a score of 700 or higher in order to help secure your loan.

Is a Co-signer on the Title of a Vehicle?

Your co-signer does not need to be on the title of your new vehicle unless you decide to add them. Ultimately, co-signing is related to financing the vehicle, not owning it, so unless you specifically ask for them to be added, their name will not appear on the title.

What is a Co-applicant vs. Co-signer Auto Loan?

The difference between a co-applicant and a co-signer is ownership. A co-applicant is a second owner with equal rights to the vehicle as the first owner. An example of this would be a married couple applying for vehicle together. A co-signer is not an owner and has no rights to the vehicle once financing is secured.

Apply for an Auto Loan With Green Light Auto Credit

Whether you need a co-signer or guarantor, or if you’re able to take a loan out on your own, all of us at Green Light Auto Credit are dedicated to helping drivers throughout the greater St. Louis area get the financing they need, whether they have good credit, bad credit, or no credit history. Contact us online to discuss how we can help you and to get answers to your questions, such as, “Can you remove a co-signer from a car loan?

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