Michael Petruccelli asks; What are some reasons you shouldn’t co-sign that loan? (9)

Michael Petruccelli says;  Keep up with insurance

Don’t forget the insurance. If your friend totals the car and it’s uninsured, he probably won’t be able to cover the cost of repairs or replacement himself – and he may not feel like paying a loan for a car he can no longer use. Guess who that leaves on the hook?

Michael Petruccelli asks; What are some reasons you shouldn’t co-sign that loan? (8)

Michael Petruccelli says;  Monitor the payments

If you’re willing to co-sign a loan, then you need to be willing to babysit that loan. That means making sure the payments get paid on time every month: ask for proof. It’ll be a hassle, but you’ll protect your credit rating – and your money.

RE- Michael Petruccelli asks; What are some reasons you shouldn’t co-sign that loan? (7)

Michael Petruccelli says;  Ask for a key

You’re an owner of the car, so you should also have a key to it. Having a key will make it easier should you ever need to take possession of the car.

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.