Never Co-Sign A Car Loan For Anyone
June 20, 2008 by Erik Folgate
Filed under Consumer News, Credit and Debt, Taxes
Recently, I was listening to the Dave Ramsey Show, and there was one story that struck a chord with me. I love to hear all of the different stories people have to tell. They range anywhere from a mom that stole her son’s identity to success stories about people paying of $60,000 in two years. This particular story was a man who called in to tell about how he helped a friend from church get a loan on a car by co-signing for the loan. He never thought that a really close friend from church would stop paying the payments, so he went ahead and signed on the dotted line. About a year later, he realized that she hadn’t been paying the payment, and the car was repossessed. Now, the bank is going after him for the money still owed on the loan. It’s a common story told on Dave Ramsey, and it’s a life lesson that is usually learned the hard way.
Life lesson: Never co-sign a loan for anyone under any circumstance.
Problems with co-signing a loan
- You want to help a friend or family member out by co-signing for a loan. This is a dangerous trap. You think you’re doing a good thing for someone by co-signing on the loan, but you really aren’t helping them. If the bank thought they should have this loan, they wouldn’t be asking you to co-sign for it.
- You’ll always end up paying off the loan. From every had story I’ve heard about co-signing loans, the co-signer always ends up paying the loan. Again, if the bank thought that that the borrower could actually pay off the loan, they wouldn’t require a co-signer!
- By the time you realize that the borrower isn’t paying the loan, it’s too late. Usually, the borrower is too ashamed to tell you that they can’t afford to pay the loan anymore, so they let it default. Then, the car ends of getting repossessed and you have a repossession on your credit. You would have much rather had them tell you that they stopped paying the payment, so you could start paying it and sell the thing. Oh by the way, the bank has no obligation to notify the co-signer that the loan is past due. Isn’t that nice?
The bottom line is, stay away from it. If you’re poor mother needs a car, buy her a $2,000 beater. Don’t co-sign a car loan under any circumstance. You’ll save your credit history and save yourself a big hassle.
