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What happens to a cosigner when a car is repossessed? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by offering interactive financial calculators and tools as well as publishing relevant and impartial content. We also allow users to conduct research and compare data for free to help you make informed financial decisions. Bankrate has agreements with issuers, including but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this website are provided by companies who pay us. This compensation may impact how and where products appear on the site, such as for instance, the order in which they be listed within the categories of listing in the event that they are not permitted by law for our loans, mortgages,, and other products for home loans. This compensation, however, does have no impact on the content we publish or the reviews that you read on this site. 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
Dan Miller Written 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 managing debts in his work. Edited by Rashawn Mitchner. Edited by the associate loans editor Rashawn Mitchner, who was a former associate editor at Bankrate. The Bankrate promises
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We receive compensation for the promotion of sponsored goods and services or by you clicking on certain links posted on our website. This compensation could impact how, where and in what order products are displayed within the categories of listing in the event that they are not permitted by law for our mortgage, home equity and other home loan products. Other elements, such as our own proprietary website rules and whether a product is available in the area you reside in or is within your personal credit score can also impact the manner in which products appear on this site. Although we try to offer a wide range offers, Bankrate does not include the details of every credit or financial product or service. Co-signing an auto loan for the benefit of a loved one or friend is a significant financial decision. It implies that you’re legally accountable for the loan payments in the event that the person who you co-sign for fails to pay the loan. As well as putting your cash 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 the vehicle is ultimately repossessed and your credit is affected, even if you’ve had an extensive track record of paying all your obligations on time. What happens when you have auto repossession When the lease is signed or purchase a car however, you do not actually own the vehicle. The lender retains the title to the car until you meet your obligations and repay the loan. As part of the papers that you signed as you drove off with the vehicle, you granted your lender permission to seize your vehicle if you stop paying the loan. The lender will typically only take possession of the vehicle as a last resort, in the event that you have stopped making payments and they believe there’s little to no chance you’ll resume payments. Many lenders would rather receive the money instead of going through the hassle of bringing the vehicle back. If you do find that a lender does decide to repossess the car, it’s usually not required to give you any kind of 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 and you have a remote starter, the lender could also block your ability to start the car. While laws vary by state, the general rule is that a lender is generally allowed to come onto private property to repossess the car. However, it’s usually prohibited to break into the garage or damage your property. Can a co-signer repossess a car? It’s important to be aware that making efforts to cure a default on an loan yourself, also known as «taking things into your own hands,» is not considered to be a acceptable alternative to legal action in the majority of states. It is a court rule to discourage the kind of physical conflict that could occur in the event that you try to seize your friend’s car, so allow the dealership or the bank take the vehicle. How a co-signer’s credit is affected by repossession co-signing a loan means that you are legally accountable for the debt. By co-signing the loan and committing to the lender that you’d ensure that payments were completed even if the primary borrower did not pay them. So, late payments or repossession will be reported in your credit reports as well. Co-signer’s liability: As the co-signer of the vehicle you’re the one responsible for the obligation until it is completely paid. Your credit score, your available cash , and the relationship you have with your delinquent co-signer are at risk. If the situation is not good, all three of those things could suffer. There are several reasons that you should be very cautious when deciding to sign a co-signer. Be cautious about who and who you are co-signing for. It is a good idea to only sign for those who are close friends or relatives you are confident. It is ideal to choose those who are financially stable. To help protect yourself in these situations, you could think about establishing a separate contract between yourself and the primary borrower. The contract should define your expectations as well as the respective obligations. After the document has been agreed to by both parties get it notarized. Rights as a co-signer as a co-signer you are legally responsible for the debt, but you do not have any legal rights to the debt . You have no legal right to own the car or any other asset. If the primary borrower falls behind on their car payments, you may think that you are entitled to repossess the car yourself however, you don’t. One option you might have to ensure your safety when co-signing a loan is to keep one step ahead. You can call the lender, find out what amount is in arrears (if any) and pay it, and then make one additional payment. Then, even if your co-signer is late on another payment the late payment will still count toward the balance and not affect your credit score. It is just a matter of staying contact with your lender and always stay at least one month behind. The other option is to request to be taken off of the loan. The primary borrower has to sign a cosigner release as well as they must also agree to the release of the cosigner. The lender will only grant approval if the primary borrower shows that they are able to pay for the loan on their own. Building credit following repossession a repossession on your credit file will result in your credit score to drop and have a negative impact on your ability to get or other kinds of loans. Repossessions for seven years are a thing of the past, so it is important to take every step to ensure that the vehicle you co-signed for isn’t repossessing. Depending on your relationship with the primary borrower you might be able to work out a deal. You could ask that they surrender the ownership of the vehicle as you continue to make payments. After the car has been completely paid for, you could sell it and recover some of the money. You might try to sue the principal borrower to recover some damages however if they fail in their obligation to repay the lender in full, it’s unlikely they would pay you. Even if you win an order against them, you’d have to know how to make it effective. It’s much better to not let it reach the point of being able to enforce it. The bottom line: Co-signing an loan is an incredibly risky thing to do and puts your credit at risk. Before co-signing the auto loan or other type of loan, consider what you’ll do if the borrower who is your primary lender defaults. Rather than co-signing, you could consider working with them to look for alternatives that don’t require a cosigner. If you’ve co-signed a loan and the primary borrower is behind on payments, you have a few options. It’s important to know that you don’t have the authority to seize the vehicle on your own. Instead, you’ll need to work out a solution with the primary borrower or continue to pay the loan for the lender. Find out more about:
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The article was written by Points and Miles Expert Contributor Dan Miller is a former contributing writer for Bankrate. Dan wrote about loans as well as home equity and managing debts in his work. The edit was done by Rashawn Mitchner. Edited by Associate loans Editor Rashawn Mitchner is a former assistant editor at Bankrate.
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