What happens to co-signers in the event of a vehicle being repossessed? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial decisions by offering interactive financial calculators and tools as well as publishing relevant and impartial content. We also allow users to conduct studies and compare information at no cost – so that you can make sound financial decisions. Bankrate has partnerships with issuers, including but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are displayed on this site come from companies that pay us. This compensation could affect how and where products appear on the site, such as such things as the order in which they appear within the listing categories, except where prohibited by law. Our loans, mortgages,, and other products for home loans. However, this compensation will affect the content we publish or the reviews that appear on this website. We do not contain the vast array of companies or financial offers that may be accessible to you. SHARE: prostooleh/Getty Images
4 min read. Published September 30, 2022
Written by Dan Miller Written by Points and Miles Expert Contributor Dan Miller is a former contributor to Bankrate. Dan was a frequent contributor to loans as well as home equity and debt management in his writing. Written by Rashawn Mitchner. Edited and written by Associate loans Editor Rashawn Mitchner, who was a former editor in charge at Bankrate. The Bankrate promises
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We receive compensation for placement of sponsored products and services or through you clicking certain links posted on our website. This compensation could impact how, where and when products are listed and categories, unless it is prohibited by law. We also offer mortgage or home equity products, as well as other products for home loans. Other factors, such as our own proprietary website rules and whether or not a product is available in your region or within your personal credit score may also influence the manner in which products appear on this website. We strive to provide the most diverse selection of products, Bankrate does not include information about every financial or credit item or product. Co-signing an auto loan for the benefit of a loved one or friend is a significant financial decision. It means you are legally responsible for loan payments if the individual who you co-sign for fails to do so. As well as placing your money at risk when you co-sign an auto loan as well, you’re also putting at risk your credit. If the loan gets in the way of default or your car is ultimately repossessed and your credit is affected, even if you’ve had a long tradition of paying all your obligations punctually. How auto repossession works When you sign a lease or purchase an automobile however, you do not actually have ownership of the car. The lender retains the title to the car until you meet your obligations and pay off the loan. As part of the papers that you signed when you drove off with your car, you agreed to give the lender the right to take possession of the car if you cease making payments. Most lenders will only repossess cars as a last resort if you’ve stopped paying and they believe there’s a slim chances that you’ll ever return to payments. Many lenders would rather receive the money instead of going to the trouble of taking the vehicle back. If you do find that a lender decides to repossess your vehicle, they are generally not required to give you any notice. The lender could send a driver to remove the vehicle, or it may hire a tow truck. If your vehicle has a remote start it is possible that the lender may also disable your capability to start the vehicle. The laws in each state are different however, the general rule is that a lender is generally permitted to enter private property to seize a car. However, it’s usually not permitted to enter the garage or damage the property. Is it possible for a co-signer to repossess the vehicle? It’s important to be aware that trying to resolve any defaults on a loan yourself, or “taking matters into your own hands,” is not considered a legitimate alternative to legal action in all states. The courts have this law to discourage the kind of physical conflict that could occur in the event that you try to seize your friend’s car, so let the dealer or bank take it. The credit score of a co-signer will be affected by repossession co-signing a loan makes you legally responsible for the debt. In co-signing the loan you have agreed with the lender that you would ensure that the payments were completed even if the primary borrower failed to make them. So, late payments or repossession will appear on your credit report, too. Co-signer’s liability: As the co-signer of the vehicle you’re the one responsible for this debt until it’s completely paid. Your credit score, your cash reserves, and the relationship you have with the co-signer you have a problem with are in danger. If the situation is not good the three issues could be affected. There are several reasons to be cautious when signing to sign a co-signer. Be cautious about who and who you are co-signing to. It’s best to only sign for those who are close friends or relatives that you can trust. It is ideal to choose those who have a stable financial situation. To safeguard yourself in such situations, you might even consider establishing an independent contract between you and the principal borrower. This contract would define your expectations as well as each person’s obligations. Once this document is executed by both parties, get it notarized. Rights as a co-signer a co-signer, you are legally responsible for the debt, but you are not legally responsible for the debt . There is no legal claim to the ownership of the car or other property. If the principal borrower is in arrears with their car payments You might think you are entitled to repossess the car yourself, but you do not. One option you might have to safeguard yourself while co-signing for a loan is to make sure you are one step ahead. You can call the lender to find out the amount is delinquent (if there is any) and pay it, and then make another payment. If the co-signer makes a second late payment the late payment can still be counted toward the balance and not affect your credit score. It is just a matter of staying contact to the lender and make sure you are 1 month in advance. Another option is to request to be removed from the loan. The primary borrower has to agree to the cosigner release, as well as the lender will only grant approval if the primary borrower shows that they are able to repay the loan independently. Credit repair after repossession an unpaid repossession on your credit report can make your credit score fall and will affect the ability to qualify for other kinds of loans. Repossessions for seven years are a thing of the past, so it is important to make every effort to ensure that the vehicle you co-signed for isn’t repossessed. Based on the relationship you have with the primary borrower you may be able to come to a settlement. You could ask that they hand over the ownership of the vehicle in exchange for the rest of your payments. When the car is completely paid for, you could sell it and recoup some of your money. You might try to sue the principal borrower to recover some damages, but if they failed to make payments due the lender, then it is unlikely they would pay you. Even if you win an order against them, you’d need to be able to apply it. It’s best not to let it reach that point. The bottom line is that co-signing a loan is a very risky decision, and it puts your credit at risk. If you are considering co-signing for an auto loan or other type of loan, consider what you’ll do in the event that the primary borrower fails to pay. Rather than co-signing, you might look into working with them and looking for options that don’t require a co-signer. If you’ve co-signed the loan and the primary borrower is behind on payments there are a number of alternatives. It’s important to know that you do not have the power to take possession of the vehicle on your own. Instead, you’ll have to either work something out with the principal borrower or continue to make payments for the lender. Learn more:
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The article was written by Points and Miles Expert Contributor Dan Miller is a former contributor to Bankrate. Dan was a frequent contributor to Bankrate’s coverage of loans, home equity and the management of debt in his work. Edited by Rashawn Mitchner Edited by Associate loans Editor Rashawn Mitchner is a former editor in the associate department at Bankrate.
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