Know the risks before you sign the paper!

3 Out of 4 Co-Signers End Up Paying for the Loan

by Steve Rhode


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Question:

Dear Steve,
In 2012, my ex-girlfriend of 16.5 years needed a car. She was unable to qualify for the loan by herself and asked me to co-sign, so I did. It turned out to be a big mistake, but I lived with her and this was not an unusual request.

About a year later, we split up due to her cheating, and she kept the car. I moved and forwarded my mail. I never received anything from the bank regarding issues and was unaware of the delinquency.

She moved to Texas from CA. The car was repossessed, and I was not notified. I was not given a chance to take over payment. Now, this is on my credit file as a charge-off. I don't understand how this was an oversight. All of my other pertinent mail from banks, etc. forwarded without notice, so why didn't this?

I have been searching about this matter and have not found out much about joint ownership. We were not married and I have a huge blemish now. I have no idea where my ex is either nor do I really want to know. I would like this off my report as it is not fair. I have never used that car as my own. I live in CA.

Can I get this off my report and should I have been notified by Chase Bank that the car was in default, repossessed, and sold?
Leah

Answer:

Dear Leah,
Unfortunately, when you co-signed for the car, you became 100% liable for the debt without any of the benefit. As a liable party, the status of the loan may be reported on your credit report and you may even be sued for the delinquent debt.

However, some state laws prohibit a lender from attempting to collect from the co-signer without first attempting to collect from the other party.

I am not aware of any requirement that the bank must notify you about the goings on of the loan.

"The lender is not required to notify you that the loan has become delinquent. It's up to you to ensure the person you cosigned for is going to make the payment on time and in full. If they don't, it's going to damage your credit history and credit scores." - Source

Are you one of the many people heading for debt trouble without knowing it? This simple checklist can help you find out and tell you how to avoid it.

As the Attorney General of Minnesota says, "The bottom line is this: cosigning a loan is a generous act with potentially serious financial consequences. You generally should only cosign a loan if you have the ability and willingness to pay off the loan in the event the borrower defaults."

The Federal Trade Commission reports, however, that three out of four cosigners end up paying money on cosigned loans. Bottom line, there is nothing good about being a co-signer. Never do that again.
Steve Rhode
Get Out of Debt Guy - Twitter, G+, Facebook

If you have a credit or debt question you'd like to ask, just click here and ask away.

This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.


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