Co-Signer Vs. Co-Borrower: What's the Difference?

If you’re planning a new car purchase and are looking at auto loans, you may have to consider a co-borrower vs. co-signer. That’s especially true if you’re buying your first car or have bad credit.

You’ll hear the two terms used a lot in relation to auto loans, so what’s the difference?

 What is a Co-Borrower?

A co-borrower is just another term for joint borrower. This is when you and another named person sign the loan agreement. These are most common with couples who get a joint auto loan for a family car.

Co-borrowers share joint responsibility for ensuring payments are made on time until the loan is settled one way or another. If one person defaults on the loan, the other named person is responsible.

A co-borrower has joint ownership of the car as well as joint ownership of the loan.

What is a Co-Signer?

A cosigner is like a guarantor and guarantees the loan for another person. They share legal responsibility for the loan but the primary borrower is you. You are responsible for paying the loan and settling it. If you default, the cosigner becomes responsible for that loan.

A cosigner guarantees the loan but does always not own the car. Some provinces handle this in different ways but usually, the cosigner has no rights over the car even if they end up paying the loan.

The Main Difference

As you can see, co-borrower and cosigner sound the same, have similar responsibilities and both will need to pay the loan if one defaults.

The main difference between co-borrower vs. co-signer is that a co-borrower is an equal partner in the loan and has equal rights to the assets. A cosigner just guarantees the loan and has no rights over the assets even if there is a default.

It’s a slight distinction but an important one.

Any cosigner you plan to use must realize that they will potentially have full responsibility for paying the whole of the loan with none of the benefits of the car that was bought with it.

While the vast majority of cosigner auto loans we deal with run without a hitch, that cosigner must be fully in the picture about what they are signing up for and their rights and responsibilities.

At least as a co-borrower, you have some rights to the car!

If you’re considering asking someone to cosign or co-borrow, choose that person carefully. If it’s a partner, you’re in this together. If it’s a friend or family member, make sure they know what they are getting into.