Co-signing a loan? Be careful.....
Q. I co-sgined for someone to buy a car and now they are defaulting on the payments. What recourse do I have so I don't lose my credit rating?
A. This co-signing thing can become a problem if the person you co-sign for stops paying. Unfortunately, when you co-sign on a loan (personal loan, car loan, mortgage, etc.), you are agreeing to be responsible for repaying the loan if the primary obligor on the loan (that is, the person who's taking the loan out) doesn't make their payments. If that's the case, it falls to the co-signer -- you --to make the payments. That's the danger of co-signing, and why you should be careful who you agree to co-sign for. If they don't pay, you have to.
What recourse do you have? Well, to make sure your credit isn't impaired, your easiest solution is to make the payments. Of course, the likelihood is that you're not in a position to make car payments for someone else; you've probably got your own payments to worry about. You could certainly contact the bank or finance company, advise them of the situation, and try to negotiate a better rate or reduced payments, but the likelihood is that you're locked into a standard financing agreement. Actually, your next best step is probably making a personal appeal to the person you co-signed for. If you haven't done so already, contact this person and try to prevail upon him or her to start making their payments. You can try to coax this person, or coerce him, or even threaten that you'll instruct the bank to repossess the car. Of course, even then, you still may be liable for any difference between what's owed and what the repossessed car sells for.
In addition, it's possible, although probably not likely, that there may be some clauses in the agreement you co-signed that might help you, or at least set out the terms under which you must pay as a co-signer. Read it carefully.
Finally, if you do make payments on the loan, the person who should be making them will be obligated to repay you. As a result, you can file a claim against him or her for payments you make that he or she should have made. Of course, if they're not making payments to the bank, it's not likely that they'll make payments to you, but at the very least, you could get a judgment against this person, docket it with the court, and then hold onto it until that person comes into money somewhere down the road.
Good luck.
A. This co-signing thing can become a problem if the person you co-sign for stops paying. Unfortunately, when you co-sign on a loan (personal loan, car loan, mortgage, etc.), you are agreeing to be responsible for repaying the loan if the primary obligor on the loan (that is, the person who's taking the loan out) doesn't make their payments. If that's the case, it falls to the co-signer -- you --to make the payments. That's the danger of co-signing, and why you should be careful who you agree to co-sign for. If they don't pay, you have to.
What recourse do you have? Well, to make sure your credit isn't impaired, your easiest solution is to make the payments. Of course, the likelihood is that you're not in a position to make car payments for someone else; you've probably got your own payments to worry about. You could certainly contact the bank or finance company, advise them of the situation, and try to negotiate a better rate or reduced payments, but the likelihood is that you're locked into a standard financing agreement. Actually, your next best step is probably making a personal appeal to the person you co-signed for. If you haven't done so already, contact this person and try to prevail upon him or her to start making their payments. You can try to coax this person, or coerce him, or even threaten that you'll instruct the bank to repossess the car. Of course, even then, you still may be liable for any difference between what's owed and what the repossessed car sells for.
In addition, it's possible, although probably not likely, that there may be some clauses in the agreement you co-signed that might help you, or at least set out the terms under which you must pay as a co-signer. Read it carefully.
Finally, if you do make payments on the loan, the person who should be making them will be obligated to repay you. As a result, you can file a claim against him or her for payments you make that he or she should have made. Of course, if they're not making payments to the bank, it's not likely that they'll make payments to you, but at the very least, you could get a judgment against this person, docket it with the court, and then hold onto it until that person comes into money somewhere down the road.
Good luck.
posted by David Kendall at
3:10 PM
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