Whose credit score is used on a joint auto loan

By Nooreen B
Modified on April 24, 2023
credit score joint auto loan, joint auto loan, joint car loan, joint credit

A joint auto loan has more than one borrower on the loan contract. Before getting an auto loan, you may be curious about whose credit score is used on a joint auto loan.

With multiple borrowers on the loan application, lenders will look at both credit scores to determine eligibility. If you are thinking about getting a joint auto loan, there are some things you should consider. Additionally, it will be essential to understand the difference between a co-borrower vs. a co-signer.

Why Do Lenders Look at Both Credit Scores for a Joint Auto Loan?

When two people agree to a joint car loan, they agree to split the monthly payment. And so, because both people are responsible for a portion of the payment, the lender will weigh both credit scores. Looking at each co-borrowers’ credit score will allow the lender to assess the risk they are taking on and plan the loan terms accordingly.

What Are Some Benefits That Come With Joint Auto Loans?

Here are some of the main benefits that can come from having a joint auto loan over a single car loan:

Income Requirements 

Let’s say you apply for a car loan but don’t have enough income to meet the requirements. A joint auto loan means that the lender will add the other person’s income to the application. This addition can help you get approved if your income falls short.

Can Make Repayment Easier 

With the split responsibility of the auto loan, the monthly payment will be much easier to handle for each person than going at it alone.

Getting Funded Even With Bad Credit 

As mentioned above, with a joint auto loan, a lender will consider both applicants’ credit scores. A joint car loan could be a better option if you have poor credit compared to a single auto loan (depending on your co-borrower’s credit score). If your co-borrower has a positive credit history and their credit score is higher than yours, your chances of approval go up! Even with a second bad credit score, the added income could definitely help you qualify!

A Joint Auto Loan Keeps Things Fair 

If you are going to be sharing the vehicle with another person, it seems fair to have both parties take on the costs of having the car!

Paying Off the Car Quicker 

With two people having to make payments, you may be able to pay off the loan faster (also dependent on the loan terms). This speed can be a huge advantage to save on interest rates. And can even help boost both credit scores once you pay off the loan! On-time payments can also positively impact your credit score and credit history. Learn more about the various tips to pay off debt faster to quickly own your car outright. 

A Few Things To Consider With a Joint Car Loan 

You will want to consider many factors before you sign up for a joint loan with someone else. Think about whether you want to share financial responsibility with another person. If the other person does not make timely payments, it can impact payment history on your credit score. It may not seem like a huge deal, but monthly debt payments are one of the top factors that make up a credit score.

And so, if a co-borrower misses loan payments, it can have an impact on your credit score. Having a defaulted loan can be even more devastating on a credit score, which usually begins with late or missing payments.

Another factor to think about is whether you can share the vehicle or not. With a joint loan both co-borrowers will have legal ownership rights over the car. And complications can arise when a car is shared.

Adding a joint applicant usually works best when there is an understanding of vehicle use. These loans typically work best for co-borrowers who are life-partners or co-habitat and share household income and expenses.

Lastly, applying jointly on a car loan may not always mean the best interest rate! Make sure to check out various lenders together and by yourself to find the better interest rate. That way, you can rest assured you aren’t paying more in interest than the vehicle value!

A Co-signer vs. A Co-Borrower 

Although co-signers sound like co-borrowers, they play two different roles with a loan. While a co-borrower is equally responsible for monthly car payments and is a co-owner of the vehicle, co-signers are not. Instead, co-signers are added to auto loans when the primary borrower doesn’t have a positive credit score for loan approval.

The co-signer’s score adds security for the lender. And so, instead of being responsible for monthly payments or having ownership of the vehicle, a co-signer is just signing up to be the responsible party if the loan defaults. This addition means that if the primary borrower cannot repay the loan, the co-signer will be responsible for full payment on the cosigned loan.

Another factor to think about before signing up for this role is the impact on credit. If the primary borrower misses payments, it can impact the co-signer’s credit. Co-signers also need to think about the amount of debt they have and their DTI ratio or debt to income ratio. Your credit score is impacted by the amount of existing debt you have in ratio to your income. And when you are a co-signer, a lender will add this new debt to your credit report. Depending on how many other financial obligations you have, another debt can hurt your credit report and credit history.

And so, it’s important to know all the ins and outs of becoming a co-signer before you agree to it.

Can I Remove Myself or the Other Person From a Joint Auto Loan? 

If you take out a joint car loan but decide that you want to change things, consider two options. One would be simple, paying off your portion of the loan works. On the other hand, refinancing your auto loan can be an option if you want to transfer the loan to a single person. 

These options can work in a few ways.

Since joint auto loans usually involve a significant other or someone who is contributing income to the same household, the following method may make the most sense to most borrowers:

The co-borrower who wants to take on repayment can go to a loan lender and get a new loan. They can apply for another car loan, a personal loan, a credit card, or even apply for a bad credit loan option with a low credit score. If they qualify, they can use that new loan to pay off the existing joint auto loan. Through this, the initial loan agreement will no longer stand.

Another scenario for those not sharing household expenses is that each individual finds a new loan to pay off their existing portion of the joint car loan.

People refinance loans for various reasons. In some cases, refinancing offers lower interest rates (for borrowers with a good credit score), a larger loan, and other factors that make debt management more accessible.

Can I Have More Than One Joint Loan? 

Like other forms of credit, you can apply for funding from an additional joint loan after taking out your first one. Keep in mind the same rules that impact a singular loan will apply to a joint loan, with the addition of your co-borrower’s payment habits. Learn more about how to manage debt wisely before signing up for multiple loan types and lenders.

Joint car loan financing offers those with limited income and a poor credit score to get the funding they need to buy a new car. Adding a co-borrower shows more income, and even with poor credit could increase chances for loan approval.

If you are considering a joint loan, you may be wondering which credit score lenders use for these loans. The answer is that there will be a credit check to each co-borrower’s credit. Lenders use both scores to determine eligibility for financing the vehicle’s value and the interest rate. Co-borrowers can help each other get a lower interest rate and save money if one of them has a good credit score.

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