Joint Loan vs. Co Signing

[Carlton]

I want to take a car loan, but my credit isn’t good enough so I was told that my only options are either a co-signer or a joint loan.

I have 3 questions

1. What are the differences between the two?
2. Which is better for my credit?
3. Which is better in terms of ability to get the loan>

Thanks

[Tracy Winters]

They are almost the same in all aspects

Neither is better or worse for the person with bad credit, and both are a liability for the person with good credit.

In a joint loan the loan is taken by both peoples. Both are the owners of the loan. A co-signer is someone who doesn’t own the loan, but guaranties to pay back the loan in case that the owner defaults.

Credit wise – there is no difference between the two. In both cases the loan will appear on both credit reports. So the loan builds (or ruins) both your credit and that of your co-signers.

This is why people are not reluctant to co sign, because co-signers (which usually have good credit) put themselves in a dangerous position when co-signing for someone with bad credit.

As to which is better with respect to getting approved, the decision of taking a joint loan or just having someone cosigning for you is actually not in your hand.

The lender will dictate what kind of loan you can get. While some lenders will dictate the loan is to be shared equally between the two persons, others will let the bad credit person to take out the loan on his name if the person with the good credit co signs the loan (i.e. guaranties that he will pay the loan in case that the owner defaults).

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