Protections for auto loan co-signers do exist but it’s more important to consider whether co-signing is the right decision BEFORE you sign. Young adults, students, and consumers with lower credit ratings will often ask for help, especially when purchasing a vehicle, but you have to remember that you are responsible for paying that loan back if there is a default. The Consumer Financial Protection Bureau has a helpful resource, “Take Control of Your Auto Loan” — http://www.consumerfinance.gov/consumer-tools/auto-loans/. The Bureau also published an auto loan “shopping sheet” to help you make sure you’re getting the best loan possible, available at http://www.consumerfinance.gov/about-us/blog/arm-yourself-knowledge-when-shopping-auto-loan/.
Remember, as auto loan co-signers:
- You are responsible for repaying the loan; and
- Co-signing can impact your own credit report
Because you are ultimately responsible, you should ask the finance company to send you monthly statements. This will help you keep track of whether your co-signer is making regular payments. Also, if the vehicle is eventually repossessed because the payments aren’t being made, be certain that you obtain the “Notice of Repossession” paperwork from the finance company and keep track of any sale dates or opportunities to reinstate the loan.
You should also always have current contact information for your co-signer. Make sure you can locate him or her and don’t let months go by without checking on the status of their loan payments.
Don’t let your good deed be punished and really consider whether you have faith in your co-signer. Also, seek legal advice as soon as you know a default may be coming to help minimize your losses.