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What happens to a co-signer when a car is taken away? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial choices by offering interactive financial calculators and tools, publishing original and objective content. This allows users to conduct studies and compare information for free and 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 Earn Money The offers that appear on this website are provided by companies who pay us. This compensation could affect how and when products are featured on the site, such as, for example, the sequence in which they appear in the listing categories in the event that they are not permitted by law. Our loan products, such as mortgages and home equity, and other home lending products. This compensation, however, does have no impact on the content we publish or the reviews appear on this website. We do not include the vast array of companies or financial deals that could be open 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 contributing writer for Bankrate. Dan was a frequent contributor to loans as well as home equity and debt management in his writing. Edited by Rashawn Mitchner. Edited and written by the associate loans editor Rashawn Mitchner who was an editor in charge at Bankrate. The Bankrate promise

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So, this compensation can influence the manner, place and in what order products are displayed within the categories of listing and categories, unless it is prohibited by law. We also offer mortgage, home equity and other home loan products. Other factors, like our own rules for our website and whether or not a product is available within the area you reside in or is within your personal credit score can also impact how and where products appear on this site. Although we try to offer a wide range offers, Bankrate does not include information about each credit or financial item or product. Co-signing an auto loan for someone you love is a serious financial choice. It implies that you’re legally responsible for loan payments if the person who you co-sign for fails to make the payments. In addition to placing your money at risk when you co-sign an auto loan, you’re also risking your credit. If the loan is in default or the car is ultimately repossessed, your credit will be affected, even if you’ve had long-standing history of paying all of your bills punctually. How auto repossession works you contract a lease or take out a loan for a car, you don’t actually own the car. The lender retains the title to the car until you have fulfilled the obligations you have made and repay the loan. As part of the documents that you signed when you left in the car, you agreed to give to the lender permission to take possession of your vehicle if you stop paying the loan. Most lenders will only repossess cars as a last resort, in the event that you have stopped making payments and they think there’s little chances that you’ll ever return to payments. The majority of lenders prefer to receive payment instead of having to go with the stress of having to take the vehicle back. If the lender decides to repossess your car, it’s generally not required to give you any sort of notice. The lender might send a chauffeur to remove the vehicle or hire the tow-truck. If your car has remote start, the lender may also disable your capability to start your car. The laws in each state are different, it is generally the case that a lender is generally allowed to access private property to seize the vehicle. However, it’s generally not allowed to break into the garage or damage your property. Can a co-signer repossess the vehicle? It’s important to be aware that making efforts to cure any defaults on the loan yourself, also known as “taking matters in your own hands” is not considered a acceptable alternative to legal action in the majority of states. Courts have this law to prevent the type of physical conflict that could occur in the event that you try to seize the car of a friend, therefore let the dealer or bank seize it. How the credit of co-signers is affected by repossession Being co-signing means that you are legally accountable for the loan. When you co-signed the loan you have agreed with the lender that you would make sure the payments got made even if the primary borrower did not make the payments. That means that the late payment or repossession could appear on your credit report too. Liabilities as a co-signer As the co-signer for the car you’re the one responsible for this debt until it is completely paid. Your credit score, available cash , and your relationship with your delinquent co-signer are in danger. If the situation is not good, all three of those factors could be affected. Here are some reasons that you should be very cautious when deciding to sign a co-signer. About who and what you sign for. It’s best to only co-sign for individuals that are close friends or family members you can trust. It is ideal to choose those who have a stable financial situation. To help protect yourself in these situations, you could be thinking about creating an individual contract between you and the primary borrower. This contract would set out your expectations and define the obligations of each party. Once this document is signed by both parties, have it notarized. Rights as a cosigner as a co-signer you are legally accountable for the debt, but you are not legally responsible for the debt . There is no legal claim to the ownership of the car or any other asset. If the principal borrower is in arrears with their car payments and you think you are entitled to repossess the car yourself however you don’t. One way to ensure your safety when co-signing a loan is to make sure you are one step ahead. You can contact the lender and find out what amount is in arrears (if there is any) and pay it and then make a second payment. In the event that the co-signer makes a second late payment, any late payments can still be counted toward the balance without hurting your credit. Just keep in contact with your lender and make sure you are at least one month behind. A different option would be to ask to be removed from the loan. The primary borrower has to sign a cosigner release, in addition, it is the lender will only give approval in the event that the primary borrower can prove that they are able to pay for the loan on their own. Building credit after repossession Having a repossession on your credit report can result in your credit score to decrease and can affect your ability to get or other types of loans. The repossession period is seven years long, so you want to make every effort to make sure that the vehicle you co-signed for isn’t repossessing. Based on your relationship with the primary borrower, you might be able to work out a deal. You could try to demand that they hand over ownership of the car in exchange for the rest of your payments. When the car is fully paid you may be able to sell it and recover some of the money. You could try to sue the primary borrower to get some compensation If they failed to pay the lender, then it is unlikely that they will pay you. Even if you get a judgement against them, you’d need to know how to enforce it. It’s much better to not let it get to this point. The bottom line Co-signing for a loan is an incredibly risky thing to do and puts your credit on the line. Before co-signing the auto loan or any other kind of loan, consider what you’ll do if the borrower who is your primary lender defaults. Rather than co-signing, you might consider working with them to look for alternatives which don’t require co-signers. If you’ve co-signed for an loan and the primary borrower is behind on payments There are several alternatives. It is crucial to realize that you do not have the power to take possession of the car yourself. Instead, you’ll need to negotiate a deal with the borrower who is the primary lender or continue to make payments to the lender. Learn more:


Authored by Points and Miles Expert Contributor Dan Miller is a former contributor for Bankrate. Dan covered loans as well as home equity and the management of debt in his work. The edit was done by Rashawn Mitchner. Edited by Associate loans editor Rashawn Mitchner, who was formerly an assistant editor at Bankrate.

Associate loans editor

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