What Is the Difference Between a Co-Applicant & Joint Applicant for a Car Loan?

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Determining whether you want to be a co-applicant or joint applicant on a car loan can be confusing, because different government entities may use the terms interchangeably. However, these are basically the same thing. What you want to watch out for is if the creditor calls you a co-signer.

Definition

The actual definition found in Regulation B does not state a difference between the terms co-applicant and joint applicant. These both apply to two or more people who request credit in both names, according to Bankers Online. On a car loan, this means that both parties have their name on the vehicle's title and both are responsible for the debt.

Co-signers

Co-signer and co-joint applicants are completely different entities under state and federal regulation. Most states consider a co-signer as someone who guarantees a loan after the creditor turns down the original applicant. The co-signer has the legal duty to repay the debt, but does not have the right to use the car.

Considerations

Whether you want to be a co-applicant or joint applicant is up to you, but co-signers come with extra regulation and risk. Creditors must disclose to co-signers the risks they take by co-signing a loan or face a discrimination lawsuit. Credit Practices Rule, or Regulation AA, contains the actual definition of a co-signer. Because the original applicant needed someone to guarantee the loan, co-signing usually is a poor decision.

Tip

When you apply for a car loan, make sure the lender knows whether you are a co-applicant, joint applicant or co-signer. In general, it is better to a be joint or co-applicant on a car note so you have legal use of the car in case the other party defaults on the loan. On the other hand, creditors only actually go after a co-signer no more than 75 percent of the time, according to the Federal Trade Commission.

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