When you can't achieve the income or credit requirements for approval on a car loan and you have the possibility to apply with either your couple, a relative or a friend, it is possible to boost your chances to get approved. Just like with home mortgage loans, it is possible to fill joint applications on car loans and add up both incomes to meet the requirements for approval.
There are however things that need to be taken into consideration. All depends on the lender but there are additional requirements that you'll need to meet in order to obtain finance this way. Income and credit requirements may increase a bit and then of course, there is the problem of the vehicle's property which may be required to be shared by the car loan applicants.
Joint Application Is Not Only Co-signing
This is an important difference to be made. When you co-sign a loan contract, the co-signer is obliged to repaying the loan, just like the main borrower. If the borrower for any circumstances can't repay the loan, the co-signer has to take his place or else he would be liable. However, the co-signer doesn't necessary have anything to do with the property purchased or used as collateral.
Joint application implies that both parties will be owners of the vehicle and thus, protected by the insurance and all the legal consequences associated with the right of property. Thus, though joint application implies the co-signature of the loan contract, co-signing doesn't imply the right of property of the vehicle and thus, is not the same as a joint application.
The Insurance Issue And Car Ownership
Joint applications imply that the borrowers will be jointly purchasing the car with the money obtained from the car loan. This requires a lot of confidence because a co-ownership has many consequences. To third parties, both owners are equally responsible for any damage and thus, will have to respond with their assets if anything happens.
Insurance however, will cover both parties. The only problem is that the insurance premium will only be as low as the higher insurance premium if both applicants would have to be considered separately. This implies significant loses for the less risky one of the co-signers. Thus, when it is an option, deciding whether co-signing or applying jointly needs to be well thought.
Co-Sign or Apply Jointly?
This question will depend on whether there is a lot of confidence or not between the applicants. Many suggest that if you are planning to help someone purchase a car that you insist on joint application because if he fails to pay the monthly payments you can always force the sell of the vehicle to cancel your debt. However, you need to consider also the consequences of owning a vehicle that you can't control all the time. If an accident happens and insurance doesn't cover it, as an owner of the vehicle, you'll also be held responsible. That won't be a problem if you just co-signed the loan. Thus, it is really up to you.
