Does Applying Jointly Help With Auto Loans?

How Does a Joint Loan Application Work?

With a joint application, two or more people apply for the same auto loan. Lenders might refer to them as co-applicants or co-borrowers.

The lender may consider each applicant's credit reports, credit scores, income and outstanding debt when deciding whether to approve the loan application and setting the auto loan's terms. If you take out a joint loan, every applicant will have equal responsibility for making the payments and they'll share ownership of the vehicle.

The lender may also report the auto loan to the credit bureaus under the co-borrowers' names, which adds it to their credit reports. Making the payments on time could help their credit scores, but missed payments, a repossession or voluntarily surrendering the vehicle might hurt their credit.

Learn more:How to Get the Best Car Loan

Co-Borrowers vs. Cosigners

If you have a cosigner, the auto lender will consider their credit and income when reviewing your application. A creditworthy cosigner might help you qualify or get better terms, and they will be legally responsible for the loan if you—the primary borrower—fall behind on payments. However, unlike co-borrowers, cosigners don't receive joint ownership of the vehicle.

Learn more:Co-Borrower vs. Cosigner: What's the Difference?

Pros of a Joint Auto Loan Application

A joint auto loan application might be a good idea if you're going to share the vehicle with someone because:

• It may be easier to qualify. Having two applicants can lower your debt-to-income ratio (DTI) and might make it easier to qualify if you have a low income or don't have good credit.
• You might receive better offers. Even if you would have qualified on your own, applying with someone else might help you get a larger loan, snag a lower interest rate or qualify for a 0% APR car loan.
• You share responsibility and ownership. A joint application might better reflect your situation if you're sharing the vehicle.

Cons of a Joint Auto Loan Application

Joint applications aren't always a good fit because:

• They can lead to a sticky situation later. If your friendship or relationship ends, you'll still have joint ownership of the vehicle and responsibility for the loan. You may need to refinance the loan in your own name to remove the co-borrower.
• They won't always lead to better offers. If you have excellent credit and a low DTI, you might not see any benefit—and could wind up with worse offers—if you add a co-borrower with poor credit or a high DTI.
• They could affect both borrowers' creditworthiness. Even if one of you agrees to make the monthly payments, the loan is both of your responsibilities. It could affect both borrowers' creditworthiness, including their credit scores and DTI, and make it more difficult to qualify for other credit accounts.
• You might need both owners to agree to a sale. Depending on how you register the vehicle, you might need both co-borrowers to sign the title if you want to refinance the loan or sell the vehicle.

Should I Apply for a Car Loan With Someone?

A joint application might be a good idea if you're applying with a very close friend, family member or partner. For example, a married couple might jointly apply for an auto loan to purchase a new family vehicle. Or, a parent might help their child purchase a car.

If you're not going to share the vehicle and you're struggling to qualify on your own, asking someone to cosign might make more sense than asking them to become a co-borrower. But you still want to carefully think through the decision. You could wind up hurting the other person's credit, and ruining your relationship, if you fall behind on payments.

There are also times when someone may be required to be a cosigner rather than a co-borrower, such as when they live in a different state and can't register as one of the vehicle's owners.

Learn more: The Best Way to Finance a Car

Check Your Credit Before Applying for an Auto Loan

Knowing your credit score can help you decide if you want to apply for an auto loan on your own, or whether you might need a co-borrower or cosigner. You can check your credit report and FICO^® Score^☉ for free from Experian. You'll also receive ongoing credit monitoring and can get tips on how to improve your credit score based on your unique credit profile. If you're thinking about getting a joint auto loan, you may want to ask the other person to check—and try to improve—their credit as well.