Michael Petruccelli asks; What are some reasons you shouldn’t co-sign that loan? (6)

Michael Petruccelli says;  Put your name on the title

 “If you’re co-signing a car loan, make sure your name is on the title as co-owner. You owe, you own.”
That will be important if you can take possession of the car should the primary borrower stops making payments. Then you can drive the car – or, providing they agree to sign over the title, sell it to help pay off the remaining balance.

Michael Petruccelli asks; What are some reasons you shouldn’t co-sign that loan? (5)

Michael Petruccelli says; You’ll have a hard time qualifying for any loan with a black mark that serious on your credit history. And if you do qualify, you won’t get the best (or even good) rates. For example, in the fourth quarter of 2011, the average interest rate on an auto loan was 4.54 percent for a prime borrower, according to Experian. Non-prime borrowers qualified for 6.34 percent on average, and sub-prime borrowers got 9.55 percent on average.

Not convinced? OK, if you’re going to co-sign anyway, at least heed this advice…

Michael Petruccelli asks; What are some reasons you shouldn’t co-sign that loan? (4)

Michael Petruccelli says;  You’re risking your borrowing power

Here’s how my scenario would have played out if I had agreed to co-sign:
At the time, I had a car and a good credit rating. I co-sign my friend’s car loan. Nine months later, he defaults on the payments and the car is repossessed. A year later, I need a new car, so I apply for a loan. The lender sees a repossession and a collection on my credit report. At this point, I imagine the lender doubling over in laughter as he turns me down.

Michael Petruccelli asks; What are some reasons you shouldn’t co-sign that loan? (3)

Michael Petruccelli says;  You’re risking your credit rating.

Your credit rating will tank if your friend or family member’s car is repossessed or they make late payments. Repossession appears on your credit report for seven years, starting from the first missed payment, Experian explains. If the lender sends the account to collections – and they will – the collection will also show on your credit report for seven years.

Michael Petruccelli asks; What are some reasons you shouldn’t co-sign that loan? (2)

Michael Petruccelli says; You are responsible for the loan.
 By co-signing, you agree to take over the loan if the primary borrower doesn’t pay. In 2011, 0.51 percent of all auto loans were delinquent – meaning they were at least 60 days late, according to Bankrate. If you had co-signed one of those loans, the lenders would be looking to you for money.
And that could spell financial disaster. Experian’s State of the Automotive Finance Market report shows that in the fourth quarter of 2011, Americans borrowed an average of $26,419 for new cars and $17,404 for used cars. I know I don’t have $26,000 lying around to cover someone else’s loan – or extra money to make their payments.

Michael Petruccelli asks; What are some reasons you shouldn’t co-sign that loan? (1)

Michael Petruccelli says;  Co-signing any loan can be disastrous to your credit, finances, and future. But if you're going to do it anyway, at least protect yourself.

Years ago, a friend told me he didn’t have the credit to get a car loan. Would I co-sign for him? I almost did it, but my father stopped me with some wise advice: “Don’t gamble with your credit score for someone else’s benefit.”
So I didn’t co-sign, but my friend found someone else to do it. Nine months later, he stopped making payments, the lender repossessed the car, the co-signer’s credit was ruined, and I had narrowly escaped financial disaster.