Introduction:
If you have this question in your mind, then this blog is certainly going to help you to get the answers to the question. You are also going to know the difference between car ownership versus financing.
And along with that, we will also be sharing the risks if you finance a car for someone else. You will even know about the difference between co-signing and ownership of a car. So, stay with us and keep reading for the information that you truly need.
Co-signing vs primary borrower
A primary borrower is liable to repay a loan whereas a co-signer will agree to repay the loan if at all the primary borrower is not in a condition of paying the loan. This content is also about Co signing vs primary borrower. Both the co-signer and the primary borrower are equally liable for the loan and all the consequences thereof. A co-signer assures about the loan repayment. He or she does not have any ownership rights to the car purchased under the loan proceeds.
The car loan in your name is seen in your credit reports and it can negatively affect credit score too. If the primary borrower does not pay, the co-signer will be held responsible for the payment in spite of not having access to the amount of loan proceeds. They might have problems getting loans approved later. The DTI Ratio will be taken into consideration.
Auto financing for other person:
Auto financing for other person is the process of transferring a car loan in the name of another person. This process can be carried out if you want to sell your car before the loan terminates. There are certain steps that you need to follow while auto financing for someone else.
Here are the steps to follow :
- Check your loan agreement : Firstly you need to verify if you can transfer your loan. This is an important step to auto finance.
- Find a transferee : Nextly you need to search for a transferee. This person needs to take the take and fulfill the lender’s needs.
- Get lender approval : The lender will verify the transferee’s past credit .
- Agree on terms : Remember both parties need to agree on fees and liabilities.
- Complete paperwork : This comprises a new loan contract for you.
- Notify relevant parties : After this you need to inform your insurer regarding this change.
- Transfer the car’s title : The car’s title must show the new ownership. The transferee will be liable for the outstanding loan debt and other future dues.
Car ownership Vs financing :
When you own a car you pay in small installments to be the owner of a car eventually whereas when you finance it is like renting without any ownership in the end. You need to know car ownership Vs financing. Both are actually convenient but owning literally means having a car while financing doesn’t mean that you own that car.
Risks of financing a car for someone else:
Knowing about the risks that are associated with financing a car is important. Here are the risks of financing a car for someone else :
Accumulated interest.
One of the most important risks of financing a car is the collection of interest as time passes. Borrowers end up paying more than the actual price of the car because of the interest rates. It is important to calculate the entire cost of the loan along with interest to know the long-term financial effect on your budget.
This is a risk that is associated with financing a car. And you need to consider this before taking further action. This is a risk that is associated with the decision of financing any car.
Depreciation and negative equity:
Financing a car is not a smart financial decision because their value depreciates as time passes. Unfortunately, car loans and finances do not have the same pattern of depreciation. This often leads to a situation called negative equity. Negative equity happens when the outstanding loan balance goes across the value of the car. This makes it very hard to sell or trade the vehicle without having other additional expenses. This is a risk if the driver is different.
Effect on monthly budget:
Car loan payments can have a great effect on the overall value of the car. Financing can have a great effect on your budget and so it is important to calculate the monthly installment along with other financial expenses before financing a car. If you fail to fulfill the terms of financing of car then it is possible that your credit score gets damaged.
Limited flexibility :
Once you have financed your car the borrower is actually legally bound by the conditions set by the lender. Trading or selling the car before the amount is totally settled can be a legal offense. This lacks dynamism for the financier of a car making it a great drawback of financing a car.
Transferring a financed car:
If you want to transfer a financed car, you require to receive an approval from your lender. Transferring a financed car needs certain criteria to be fulfilled. You need to find a purchaser and transfer the registration along with the insurance of your car in his name.
There are certain steps that you need to follow.
- First get lender approval.You need to contact your lender to have a discussion regarding transferring of the. They will wish to get the details of this loan.
- Now you need to find a buyer.You can search for a buyer via your contacts or a used car dealership.
- Nextly, you need to check the buyer. The lender will want to scrutinize the buyer’s credit past.
- Now, you need to transfer the car’s registration in the transferee’s name.
- Make sure that the car’s registration is transferred in the name of the buyer.
- Next, you need to find a purchaser. This is an important step.
- Lastly, you need to transfer the car’s insurance. You need to make sure that the car’s insurance is in the name of the buyer.
Conclusion:
This blog is an important piece of content discussing the difference between co-signing and primary ownership. This blog also informs you regarding auto financing to other people. It even explains the difference between car ownership and financing. We hope that we have shared the most important and relevant details to you through this blog.
FAQs :
1.Can I take a car loan on behalf of someone else?
Ans. As some financial agencies and banks allow unrelated persons or other family members to become a car loan co-signer, you can find some lenders who are extremely strict with their conditions and allow only co-signers who have the similar residential address with the borrower. This is an important condition if you want to take a car loan on behalf of someone else.
2.Can someone else drive my car ?
Ans. No, according to the Motor Tariff, you can drive a car under the permitted laws. But there are some countries in the world where someone else driving a car owned by you is illegal and any third person cannot drive your car.
3.Can I give my car to a friend to drive?
Ans. ‘Permissive driving’ rules are applicable under such issues. The driver must be driving your car with your knowledge along with a legal driving license. As per Motor Tariff, anyone can drive your car under the permitted rules. Therefore, do not worry and relax before lending your car to your family members or friends.
4. Does it matter whose name is on the car?
Ans. Yes, absolutely. The name on the car ownership title can affect insurance coverage. Insurance agencies normally need the policyholder to have an insurable interest in the vehicle. They either have the car under their own name, title or have a considerable financial interest associated with the car.
