Co-Signing A Loan (Your Advice)

Your Advice - help answer readers' questionsCo-signing on a loan is not something to undertake lightly. The reason that people need you to co-sign is because they have some issues with their credit or otherwise there would be no need for you to do so. And even if they have the best intentions to pay, sometimes things don’t work out as expected and you get left cleaning up the mess as this reader found out:

My daughter and her husband were in a big financial bind last year when their car broke down. They needed a new one and to help them out I cosigned their car loan so that they could have transportation.

They stopped payment on the loan a few months ago when my daughter’s husband got laid off from work. They keep telling me that they are going to pay, but never do and since he still doesn’t have a job, I don’t see where they would get the money to do so.

Now the creditors are coming after me for payment. I don’t even drive the car so I don’t see why I should have to pay for it. I can’t afford this expanse so I need to know how I can get out of this situation? Do I have any options or am I stuck paying?

If you found yourself in a similar situation, what steps would you take in order to limit the financial damage of the situation?

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6 Responses to Co-Signing A Loan (Your Advice)

  1. a lot of the time there are “limited liability” loans that you can co-sign for, where you are only liable for a certain amount and it limits what the banks can take off you. maybe research those before signing the documents for the loan.
    or if it’s already happened and you find yourself paying the payments for someone elses car maybe you could suggest to your daughter or the person who you signed the loan for, to sell something that they could do without, to cover the payments of the loan for a certain amount of time. perhaps they could sell the car and get one that is smaller and cheaper?

  2. kenny says:

    You have a decision to make. If it were me, I would demand the car back and I would sell it and recoup as much of the money as possible. Letting them continue to use the car without paying for it will only encourage them to take financial advantage of you in the future. If they are not paying, then it is your car.

  3. Spokane Al says:

    Yours is the perfect example of the reason for never, ever co-signing for a loan. When you put your name on the dotted line you are saying that you will pay if the people/person you co-signed for does not.

    Payments are not being made and the creditors are rightfully looking to you. After all, with your signature, this is exactly what you agreed to do.

    I agree with Kenny. Get the car and sell it and pay off the loan. Your credit is at risk here.

  4. Michael says:

    You have to pay for the car because you co-signed the loan. They got the loan because of your promise to repay, so the creditors are right to enforce that promise against you. You’re on the hook regardless of your use of the car. You should take possession of the car, sell it, and pay off the loan…or continue to pay each month (and pay the arrears) while your daughter and SIL keep driving it.

  5. Amy F. says:

    I agree with Kenny. Unfortunately, you are financially responsible for the vehicle.

    I don’t think it was a good idea to co-sign the loan in the first place. If they couldn’t afford a car, they definitely didn’t need to be buying one that was expensive enough to require a loan! A car, especially a newer one, is a luxury, not a necessity.

    I can see that you’re getting on the right financial track now though by doing things like reading this website and asking for help. Good luck.

  6. abicadaby says:

    My sister and her ex husband are doing the same thing to my mother that has great credit. Would it be possible to take them to court???

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