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

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, both words mean basically the same thing. What you want to watch out for is if the creditor calls you a co-signer. Then, you're guaranteeing someone else's loan payments without getting any of the benefits of owning the car.

There is no difference between the terms co-applicant and joint applicant. These definitions both apply to two or more people who request credit in both names. On a car loan, this means that both parties have their name on the vehicle's title and both are responsible for the debt. The car loan company will check the creditworthiness of both applicants, and both applicants will need to meet the minimum required credit score. That's because co-loans are usually "joint and several" loans, which means that each co-applicant is 100 percent responsible for 100 percent of the debt. If one joint applicant did not pay, then the car company could ask the other joint applicant to do so. It is common for spouses to sign a car loan as join applicants.

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 that's taken out by the original applicant. The co-signer has the legal duty to repay the debt, but does not have the right to use the car. In a car loan situation, it is common for parents to act as co-signers for their child's loan. In this scenario, the applicant may not meet the credit criteria to carry the loan on his own. But if the co-signer has stellar credit, then the car loan company usually will allow the loan through.

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.

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.