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What to do if you cosigned a car loan that isn't paid

New Contributor

What to do if you cosigned a car loan that isn't paid

I'm asking for a friend.  She cosigned a car loan with a relative with the agreement that the relative would pay for it.  The relative is elderly and my friend drives her to go shopping and to appointments.  The relative will be moving to another state and taking the car.  If the relative doesn't pay (which is likely to happen, since she has bad credit), what would be the best thing to do to minimize the damage to her credit?

 

If the car is repo'd, then do lenders work out a payment plan to keep the repo of the report?  Any suggestions?  My friend can't afford the payment on her own, so taking the car and paying for it wouldn't be an option.  But she could make smaller payments without keeping the car.

My FICO: EQ 710, TU 698, EX 699 3/2016


My FICO: EQ 675, TU 674, EX 678 12/21/2015

My FICO: EQ 675, TU 670, EX 674 4/21/2014

Goals: 740+ FICO, 30k+ total credit limit on CCs and mortgage in 2017 or 2018

Verizon Collection $152 reported 2011 on all bureaus
Chase Charge off $690 reported 2009 on only on EQ, Will fall off Jan 2016



Message 1 of 9
8 REPLIES
Community Leader
Super Contributor

Re: What to do if you cosigned a car loan that isn't paid

Co-signing is like getting the car on your own.  So any negative impact won't be kept of the reports.  How about selling the car to pay the loan instead of having it repo'ed?

Message 2 of 9
New Contributor

Re: What to do if you cosigned a car loan that isn't paid

The question was what to do if it gets to the point that it is repod or about to be repod.  The sale of the car wouldn't cover the loan amount most likely.  And the difference can't be covered with cash. 

 

Do lenders take payment plans if that were to happen? 

My FICO: EQ 710, TU 698, EX 699 3/2016


My FICO: EQ 675, TU 674, EX 678 12/21/2015

My FICO: EQ 675, TU 670, EX 674 4/21/2014

Goals: 740+ FICO, 30k+ total credit limit on CCs and mortgage in 2017 or 2018

Verizon Collection $152 reported 2011 on all bureaus
Chase Charge off $690 reported 2009 on only on EQ, Will fall off Jan 2016



Message 3 of 9
New Contributor

Re: What to do if you cosigned a car loan that isn't paid

Payment plans would be at the discretion of the lender. They are not required to set up a payment plan but some may do it because at the end of the day all they want is their money. If the car is repo'd, they will sell the car for as much as they can get and your friend and relative will be responsible for the difference. When it happened to me with American Honda, they immediately turned the balance over to a collection agency and they requested full payment of the outstanding balance. So it really depends on the lender.
As of 11/02/15:
EX-679, TU-707, EQ-690 (FICO 08),7/31/15 691 (FICO 04)
CAP ONE QS-$4,250, CAP ONE QS-$2K, CAP ONE VISA SIG-$7K, JETBLUE AMEX-$5K, DCU PLATINUM VISA-$6.5K, AMAZON STORE-$5k, BANANA REPUBLIC-$5k

AU ACCTS: CAP ONE QS-$1.5K, CAP ONE CLASSIC-3K, BLOOMINGDALES-$3K, NORDSTROMS-$1K
Message 4 of 9
Established Contributor

Re: What to do if you cosigned a car loan that isn't paid

In addition to the good information already given, I would add that your friend needs to be constantly watching her credit report for changes to this account. Every missed/late payment is going to show up on her report. She will know well in advance of a repo that there is a problem if she watches it.



Giving up on the images for now

Stepped out of the garden 10/9/16

Message 5 of 9
Established Contributor

Re: What to do if you cosigned a car loan that isn't paid

Have the friend receive payments directly from the relative, and the friend can send them in. OR, if it is a real bank with online banking, they both get access to the online account, so that your friend can keep tabs on it and not find out she's SOL when it's already too late.

Consigning is scary.
23 Open Bank Cards / 7 Open Store Cards / TOO many inquires / Mid/High 600's
Message 6 of 9
Highlighted
Valued Contributor

Re: What to do if you cosigned a car loan that isn't paid


gibeon wrote:
Have the friend receive payments directly from the relative, and the friend can send them in. OR, if it is a real bank with online banking, they both get access to the online account, so that your friend can keep tabs on it and not find out she's SOL when it's already too late.

Consigning is scary.

THIS!

 

Your friend needs to keep an eye on the account and be prepared to make the payment if the relative does not.  

Ch 7 Discharge 3/12/2018
Credit One $500, Wayfair $3,500

AU Cards: CSP $34.2k; Chase Marriott $20k; Citi TY $8.5k; Barclays Arrival+ $15k
Message 7 of 9
Valued Contributor

Re: What to do if you cosigned a car loan that isn't paid

Take some photos of the car and post it on craigslist.  

Message 8 of 9
Frequent Contributor

Re: What to do if you cosigned a car loan that isn't paid


tidegirl wrote:

In addition to the good information already given, I would add that your friend needs to be constantly watching her credit report for changes to this account. Every missed/late payment is going to show up on her report. She will know well in advance of a repo that there is a problem if she watches it.


what a dilemna! yikes! I wouldn't let it start reporting to the credit bureaus, I would contact the bank every month to make sure the payment was made. If not, then perhaps try to refi for a longer period of time to get the payment lower if possible so you can take the car and pay it. If you can't afford a car payment then how in the world were you approved as a cosigner?! that makes no sense.

FICO 8 Scores: EX 706 (11/3/2016) EQ 696 (11/17/16) TU 708 (11/17/2016)

"Use your Credit wisely, don't let it use you!"~Me Smiley Very Happy

Message 9 of 9