Questions on Car Loans, brother wants me to co-sign, avoid high interest

[Anonymous]

Do not do it!!  I co-signed for my daughter for a car.  She defaulted and didn't tell me she couldn't make the payments.  I didn't find out until a collection agency contacted me.  I paid it in full but it was still on my credit for 7 years as a paid charge off.  My score was in the low 700's and I couldn't get any higher.  The day it came off one report my score went up 65 points.  I am now in the high 700's/low 800's and it just came off in December 2008.

One thing... your brother is mad at YOU?  This is the type of person that doesn't take responsibility for their own actions.  Instead of taking the responsibility for his score being so low and facing that it is HIS doing and that HE is the one who needs to do something about it, he is mad at you for not making it "easy" for him. 

Don't let him place a guilt trip on you, making it YOUR fault that he doesn't get the car.

[LuvsRetro]

Please OP, I sincerely hope that you did not co-sign.  My brother co-signed for his nephew, because his dad, our brother, had horrible credit.

So, 6 months later, nephew leaves the state, truck in tow, and then proceeds to sporadically make payments on the account. 

16 or 17 months later, he let's the account go into charge-off status. 

My brother (that co-signed) was never notified of any of the problems on the account, until a Ford Repo man came to his house.

My brother had never had a late payment in all of his years of credit until this Ford account.  My nephew dad refused to tell my brother of the nephews whereabouts.

To make a long story short................My brother paid it off to stop the negative reporting.  That was in 2005.

Now it reports "Paid Charge Off" on one and something about "Repossession" on another along with 3 solid years of late payments. 

This is like a "sore thumb" on his report.

So, stand your ground!!!!!

Message Edited by teamfico on 05-11-2009 09:39 AM

[Anonymous]

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@MattH wrote:

A large fraction of calls to the radio programs of various financial advisors are by people who cosigned on a loan for a relative and came to regret that decision.  I would advise against cosigning for your brother, but if you do cosign then I suggest you insist that:

1. A lawyer of your choice will be hired to protect your interests and only your interests, whom you will pay and your brother will later reimburse you for the fees.  If your brother wants a lawyer then it has to be a different lawyer, this lawyer is working for you and you alone in this transaction.
2. You will have full access to the website of the lender so you can verify that your brother is making payments on time.
3. Your brother will provide you with proof the car is insured and that he pays on time for every renewal.
4. Your brother must come up with a downpayment of at least 25% on whatever car he buys, if he cannot come up with 25% then he cannot afford that car and must lower his sights to a car he can afford.  And the cost of gas is a poor excuse for going car shopping, because any car purchase costs a lot more than a year's gas.  IF you do allow your brother to borrow more than 75% of the purchase price then you MUST insist he have GAP insurance, because if your brother is upside-down and the car gets totaled in an accident regular insurance will only pay what the car is worth and YOU could end up on the hook for a loan on a car that no longer exists.
5. You will have a set of keys to the car.
6. Your lawyer will make sure the legal paperwork is worded in such a manner that if your brother ever falls behind on his payments YOU can take his car away from him, sell it to the buyer of your choice WITHOUT his permission, pay off the loan, and finally give him whatever equity may remain or go after him for any deficiency if the sale doesn't cover what is owed.

If your brother complains the above conditions suggest you distrust him, tell him it's time for a little tough love: if your brother had managed his affairs in a responsible manner then he would not need a cosigner.

Points 5 and 6 are essential: if he is asking you to risk your credit rating on his payment performance then you must be able to protect yourself if he fails to keep up his end of the deal.  If you are not careful you might find yourself having to pay your brother's loan to protect your own credit but not be able to take the car away from your brother and sell it to recoup your losses!  You don't want a situation where your name is on the loan but not on the title!

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+1

Also, the situation is only that the brother can't get a good interest rate, not that he can't get a loan at all. So he should just get an initial loan at 16%, then improve his credit reports and scores, then apply for refinancing with a CU to get a better rate in 6 months or a year. There's no reason he shouldn't be willing to do that ...

[Anonymous]

Thanks again for all the advice. This was more than I expected.

I was already leaning to not co-signing, and you guys help strengthen that decision and made me understand I'm doing the right thing by refusing and to not feel guilty. My brother is very immature so it was hard to get through to him that this was a bad idea. It's also hard to explain to someone that's immature that being immature is a reason too. Luckily his wife was more level headed and when we talked the issue was pretty much put to rest. I left it by telling them to go to school credit union, only 5 minutes away, to see what they offer there for a loan.

Though, come to find out, on Mother's Day, they bought the car with the high interest through the dealer. They traded in an old used car, plus $500 down, and 72 month loan, coming to $238 a month I think (sticker price was $11,500 before tax). I think the wife knows this is not a good deal, but she didn't to lose this car and plans to try refinancing later with the CU as they build up credit (As also greatly suggested in the above post). I still think it was crazy to not atleast check with the credit union first, oh well.

EDIT: I'm new to this forum and clicked the solution button on this post since the problem resovled itself, and everyone had good points and were right on target. So I hit the button to let the issue be known that it's over, as if closing the thread, but I didn't mean to boost any stats on my forum account that I now see that it does. So forgive me if this appears odd to have done.

Message Edited by TimothyB on 05-11-2009 12:38 PM

Message Edited by TimothyB on 05-11-2009 12:44 PM

[haulingthescoreup]

lol, don't worry about the solution thing (and random kudos.) None of us have quite gotten the hang of it all, I don't think.

I'm glad they took care of it themselves. They'll muddle their way through, and now he has a good incentive to get working with a CU.

Post of the day: "It's also hard to explain to someone that's immature that being immature is a reason too. " Lordy, ain't that the truth.

And yes, when anyone posts about maybe co-signing for a loan, they can expect a flood of responses. That whole lack-of-control-over-an-account thing really gets the pucker factor going.

[MattH]

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@haulingthescoreup wrote:
...
And yes, when anyone posts about maybe co-signing for a loan, they can expect a flood of responses. That whole lack-of-control-over-an-account thing really gets the pucker factor going.

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Yep, cosigning is usually a big no-no!  The only case when it might make sense is an older relative with good credit cosigning for a younger relative whom the older relative knows extremely well, in which case the only negative for the young person is limited history. Otherwise, cosigning is very risky, because if they want a cosigner there is usually a reason.

[Anonymous]

Just to make this whole thread even more clear....

Just a month after NOT co-signing with my brother, he just now lost his job.

Not sure if he'll get unemployment because the company that's been doing some firing recently is using dirty tactics to terminate instead of lay-off. So I'm glad I'm not going to have to pay his car payment to protect my score.

I don't think they should have ever bought such an expensive, especially used car for $11k when they were scraping by and such bad unemployment lately, and our city is one of the highest ranked in the nation I hear. They could of got a new Hyundai Accent for that price, new 10 year warranty (which didn't transfer with their used Hyundai), and they would of had that assurance plan where hyundai would of taken the car back due to loss of income.

[smallfry]

Sorry to hear your brother lost his job but that's why everyone told you not to co sign. 

[haulingthescoreup]

I hope they scramble through OK, and maybe learn a bitter but useful lesson in the process.

"Those who cannot remember the past are condemned to repeat it." --George Santayana

[Anonymous]

He should not be going to dealers to get the financing and with her credit score they don't need you..So somethings fishy here. Tell them to go to a credit union or their own bank to get the car loan and to sell the car they presently have and they will get more for it. tell him to  blue book it and sell it on craigslist

If he and his wife cosign and its a brand new car they wont even use his credit score so they don't need you.

again something fishy here. Tell them they will get the best rate at a CU I have a 640 fico and i got a loan at 7.99%