The word “co-signer” should send shivers up your spine. Lenders, the people that do loan money to many people all the time and have heard and seen every story, ask for a co-signer when they think a particular borrower is not going to keep making payments, so they want to be sure they can get the money from someone else. From the Consumer Financial Protection Bureau, “Co-signing an auto loan does not mean you have any right to the vehicle, it just means that you have agreed to become obligated to repay the amount of the loan.”

Thinking of co-signing for a loan with your true love, boyfriend, girlfriend, spouse? Remember breakups happen, life will throw changes at both of you over the coming years. Your child asked you to co-sign for a car? Just go ahead and buy the thing outright because if your child defaults on the loan, you’re going to be on the hook for the loan and the penalties. In a jam need cash and someone offers you cash to be a co-signer? You will get a few hundred dollars to sign then owe $10,000+ probably in less than a year.

DON’T DO IT.

DO NOT agree to co-sign for ANYONE – not a family member, co-worker or friend.

• Having access to use the car or house that you’re considering co-signing for, makes no difference, you’re taking on all the risks of ownership if a payment is missed. In fact, the co-signer usually gets sued first if the situation goes to litigation. Why? Because you – with all of your good credit – were the reason the person was able to qualify to get the loan in the first place.

• If the lender is not in the mood to sue and merely wants to settle, your taxes could be severely impacted for the difference between what was owed and the settled amount. This is referred to as “debt forgiveness income.” as noted in an article from the Oswalt Law Group.

• Co-signing a loan may also affect your ability to obtain loans for yourself. Higher credit utilization, late payments, a foreclosure or repossession could all be added to your credit reports.

• The creditor can collect this debt from you without first trying to collect from the borrower. The creditor can use the same collection methods against you that can be used against the borrower, such as suing you, garnishing your wages, etc. If this debt is ever in default, that fact may become a part of your credit record.

• Once you sign as a co-signer, there’s no turning back. The only way your name can be removed is for the primary signer to refinance the loan because they will then have to re-qualify for the loan on their own. There is no incentive for the borrower to refinance because they may not be able to that’s why they needed a co-signer in the first place or if they do they will pay a higher interest rate and have higher payments.

• You can pretty much kiss your relationship with whomever you’re co-signing for goodbye. Few things come between friends and family like borrowed money. The one asking you to co-sign feels uncomfortable about asking you – or at least, they should – and you’re going to feel awkward asking about payment status.
  
  

REMEMBER: If you co-sign a loan, you are legally obligated to repay the loan in full. Co-signing a loan does not mean serving as a character reference for someone else. When you co-sign, you promise to pay the loan yourself.



https://www.consumerfinance.gov/ask-cfpb/i-was-asked-to-co-sign-financing-for-a-car-what-am-i-being-asked-to-do-and-what-does-this-mean-for-me-en-813/