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Need info about being a Co-signer for a loan.

T

Tomekeuro85

Sergeant
Commercial Supporter
Full Member
Minuteman
Oct 11, 2007
592
1
39
Chicago Suburbs, IL
#1
Long story short,

A friend is looking to buy a car, but her credit is ruined.

SHe has had a heart condition since birth that costs lots and lots to keep under control and supervision. Because of this, she at one point was not able to afford her medical bills and school at the same time, so she picked to pay for her Master's.

Now her credit = down the tubes. Shes not financially irresponsible by any means, but she cannot get a loan anywhere after trying for a few months.

I want to cosign for her, but I'm looking to safeguard myself.. my credit is perfect, in the 800's and i want it to stay that way.

Though I dont expect something like this to happen,

1. what if she doesnt make a payment? Will they contact me first for money, or will they go straight to credit damage?

2. Price of the car isn't an issue. WORST case scenario if she bails, I could just pay it off, (its a sub $7000 car, very small monthly payments, she wants to do the loan to rebuild her credit)

3. Any other info that might help me out in a case of unfortunate circumstances?

Thanks!
 
#2
Re: Need info about being a Co-signer for a loan.

Not to sound harsh and uncaring but DON'T DO IT! How many good, sound friendships have ended because of monetary issues?

If you really want to help her and if she's serious about repairing her credit, refer her to THESE PEOPLE. They work wonders and for what they do, they are not very expensive. Take it from someone who knows.

By the way, a loan in an of itself isn't going to totally repair her credit. There are many other factors that go into play. If she does start to miss payments it will eventually have a negative affect on your credit score.
 
#4
Re: Need info about being a Co-signer for a loan.

You need to review the T&Cs of the contract to see if they will automatically ding her and your credit for any late payments or if there is an automatic process of trying to debit your account/card for the money within the first 30days of the payment being due.

Its a good idea to go with her to the car dealer to sort this out and get ALL the fine print up front.
 
#8
Re: Need info about being a Co-signer for a loan.

What they all said, DONT DO IT. An alternative might be for you to buy the car and finance it for her...if shes that good of a friend. Then the worst that could happen is you have an extra car...just make sure she keeps the ins up, and you might want to look itover frequently to make sure the oil is changed.....

And congratulations on the 800 credit score...Mine was there but I made one little mistake and it slipped to about780 before I could blink.

dont do it.
 
#9
Re: Need info about being a Co-signer for a loan.

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Michael Aos</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Tomekeuro85</div><div class="ubbcode-body"> my credit is perfect, in the 800's </div></div>

FYI, being in the 800's is the most-common credit score (top 25%).
-- </div></div>

Well I wansn't saying its an ultra mega achievement, I just want to keep it up there.


I figure there would be a lot of "don't do it" answers...

But my only concern here is avoiding potential damage to my score.

If I can work that out prior to the agreement then there wont be any problems.

Like I said I dont expect this to ever be a problem. but better safe than sorry. I like to see every issue before it happens and be prepared for it.

Ideally, they'll have an option to either contact me before any credit damage ensues, or to just take the money out of my account if she doesnt pay.
 
#10
Re: Need info about being a Co-signer for a loan.

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Tomekeuro85</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Michael Aos</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Tomekeuro85</div><div class="ubbcode-body"> my credit is perfect, in the 800's </div></div>

FYI, being in the 800's is the most-common credit score (top 25%).
-- </div></div>

Well I wansn't saying its an ultra mega achievement, I just want to keep it up there.


I figure there would be a lot of "don't do it" answers...

But my only concern here is avoiding potential damage to my score.

If I can work that out prior to the agreement then there wont be any problems.

Like I said I dont expect this to ever be a problem. but better safe than sorry. I like to see every issue before it happens and be prepared for it.

Ideally, they'll have an option to either contact me before any credit damage ensues, or to just take the money out of my account if she doesnt pay. </div></div>


If you sign and want to prevent damage to your score, then you will be making the payments. There's no two ways about it.

Either sign and relinquish control of your credit to her payment schedule, or take over the responsibility for payments, because as a cosigner that's essentially what you're doing.

Don't do it.

I've cosigned a number of things for family members out of absolute necessity and that's all there is to it. You're a fool to do it for a friend.

A real friend would help her learn how to manage her credit and improve her score so that she can buy a car. If her credits so screwed she can't even buy a car she's obviously in no shape to start being responsible for your credit score.
 
#11
Re: Need info about being a Co-signer for a loan.

As the others have said don't do it .Your cosigning a loan for her so she will be getting the monthly bills ...if she don't pay them it reflects on you. If she misses three payments they will repossess the car.
 
#12
Re: Need info about being a Co-signer for a loan.

I appreciate everyone's concern, but I think many are missing the question.


I know the hazards of being a co-signer.. ie the other person doesn't pay.

I am fully prepared to, and capable of, paying the full payment and I have no problem with doing so.

My only question here was, will I be warned before my credit score is effected/ will I get a chance to take over before they start reporting to credit bureaus?

From some of the answers, it seems as though, yes I will be warned and I will be able to make the payments myself.

I suggested that I be a co-signer, and I knew what the risks were before I offered the idea to her.


But I do believe I have my answer...
 
#13
Re: Need info about being a Co-signer for a loan.


Tomekeuro85 wrote,


<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Well I wansn't saying its an ultra mega achievement, I just want to keep it up there.


I figure there would be a lot of "don't do it" answers...

But my only concern here is avoiding potential damage to my score.

If I can work that out prior to the agreement then there wont be any problems.

<span style="color: #FF0000">Like I said I dont expect</span> this to ever be a problem. but better safe than sorry. I like to see every issue before it happens and be prepared for it.

Ideally, they'll have an option to either contact me before any credit damage ensues, or to just take the money out of my account if she doesnt pay.</div></div>

You have to somewhat expect that there is the potential for this to be a problem or else you wouldn't be on here asking financial advice from total strangers.

What if things aren't as "ideal" as you'd want them to be and as soon as she misses a payment they send it to the credit bureaus? What if they don't just take it out of your account?

Like I said in my first post, if you REALLY want to help her refer her to LEXINGTON LAW FIRM. They will help her repair her credit in no time with minimal work on her part.

If you still insist on co-signing then go ahead, just let us know how it works out for you in the long run.

And FYI after a credit score of 800 lenders stop looking. Meaning an 800 is about the to a lender as a perfect score which I believe is 850. So it is quiet a feat to have one and you should strive to keep it.
 
#14
Re: Need info about being a Co-signer for a loan.

The best way to handle it is to buy her a car, give it to her and let her sign a note with you, and make payments to you. If you can't afford to do that then you should not be considering this at all. This is the only way to ensure that your kid, best friend, relative, or someone that you just simply feel sorry for, does not ruin your credit without your knowledge. My wife is a financial officer at a bank, and I can tell you that without a good credit score in this economy, your screwed!
 
#15
Re: Need info about being a Co-signer for a loan.

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Tomekeuro85</div><div class="ubbcode-body">
From some of the answers, it seems as though, yes I will be warned and I will be able to make the payments myself.

</div></div>

Car dealerships make the person with the best credit the primary. But either way you're both buying a car and your credit will eat shit the same second her's does, there is no warning system for co-signers, why would a bank do that? The only warning you might get is her saying she isn't going to pay. Other than that you're next warning will be from the creditor asking if you want to make the balloon payment on their repo.

Why don't you just buy her a car and she can pay you back.
 
#16
Re: Need info about being a Co-signer for a loan.

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: BamaLoaded</div><div class="ubbcode-body">The best way to handle it is to buy her a car, give it to her and let her sign a note with you, and make payments to you. If you can't afford to do that then you should not be considering this at all. This is the only way to ensure that your kid, best friend, relative, or someone that you just simply feel sorry for, does not ruin your credit without your knowledge. My wife is a financial officer at a bank, and I can tell you that without a good credit score in this economy, your screwed! </div></div>


This was my other idea.

have the loan linked to my bank account, and the monthly payments will be made directly by me and she will pay me each month instead of the lender. This way if for some reason she doesn't pay, they lender still has their money and my credit is safe.

As I said I don't expect it to be a problem but I am preparing as if there WILL be a problem. This way I can't lose.

The money isn't a concern here, just my credit. If I end up having to pay... whatever.

With her down payment, it wont even be $5000. The average rifle here costs more than that.

Credit on the other hand isn't so easy to come by.
 
#19
Re: Need info about being a Co-signer for a loan.

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: BamaLoaded</div><div class="ubbcode-body">The best way to handle it is to buy her a car, give it to her and let her sign a note with you, and make payments to you. If you can't afford to do that then you should not be considering this at all. This is the only way to ensure that your kid, best friend, relative, or someone that you just simply feel sorry for, does not ruin your credit without your knowledge. My wife is a financial officer at a bank, and I can tell you that without a good credit score in this economy, your screwed! </div></div>

Since you mention that the overall price of the car isn't a issue I would follow this advice. Just buy the car and let her make payments to you. That way she'll have the car and you'll have your credit. Sounds like the only way to help a good friend and not get burned. Remember, <span style="font-weight: bold"><span style="color: #FF0000">NO good deed goes unpunished</span></span>.
 
#20
Re: Need info about being a Co-signer for a loan.

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Jeo556</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: BamaLoaded</div><div class="ubbcode-body">The best way to handle it is to buy her a car, give it to her and let her sign a note with you, and make payments to you. If you can't afford to do that then you should not be considering this at all. This is the only way to ensure that your kid, best friend, relative, or someone that you just simply feel sorry for, does not ruin your credit without your knowledge. My wife is a financial officer at a bank, and I can tell you that without a good credit score in this economy, your screwed! </div></div>

Since you mention that the overall price of the car isn't a issue I would follow this advice. Just buy the car and let her make payments to you. That way she'll have the car and you'll have your credit. Sounds like the only way to help a good friend and not get burned. Remember, <span style="font-weight: bold"><span style="color: #FF0000">NO good deed goes unpunished</span></span>. </div></div>

That was my first offer... but she wants the payments to help her credit
 
#21
Re: Need info about being a Co-signer for a loan.

Default against medical bills isn't looked upon as damaged credit by most lending institutions. If they're declining her for a simple car loan, her credit is likely damaged for other reasons than medical. Something you should probably look into a little deeper before you get involved. I'd sit down with her and examine her credit report to see where the damage was done.
 
#23
Re: Need info about being a Co-signer for a loan.

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Tomekeuro85</div><div class="ubbcode-body">My only question here was, will I be warned before my credit score is effected/ will I get a chance to take over before they start reporting to credit bureaus?</div></div>There is no way anyone here can give you the answer to that question because you are asking the wrong people.

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Tomekeuro85</div><div class="ubbcode-body">I am fully prepared to, and capable of, paying the full payment and I have no problem with doing so. </div></div>If you're that smitten just lend her the money or buy her the car. Because if she really wants to fix her credit she can do that without you.
 
#24
Re: Need info about being a Co-signer for a loan.

If you co-sign on the loan and she defaults, <span style="font-weight: bold">YOU</span> are then responsible for the loan. It will not hurt your credit score as long as <span style="font-weight: bold">YOU</span> are financially prepared for that car payment.

Keep in mind if it affects your debt-to-income ratio to a certain extent...it <span style="font-weight: bold">WILL</span> impact your credit rating. I'd research it a bit further before doing it. I won't say don't do it, but if you do, be prepared to buy that car.

BTW, I have an 848 credit score and I don't put myself in situations where it could be damaged FWIW.
 
#26
Re: Need info about being a Co-signer for a loan.

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: DRA-M40A1</div><div class="ubbcode-body">I suppose you could still cosighn but have the payments set up from you to the lender. </div></div>


Yea, Just talked to her, thats what will happen.

The money isnt an issue, and I explained to her that my credit score is very good and its important for it to stay that way and I'm going to make the payments, with her sending me a check each month.

She had no problem with it, and I know it wont be an issue anyways. But I prefer to protect myself first.

Thanks everyone.
 
#27
Re: Need info about being a Co-signer for a loan.

WTF does she need credit for? If she saves and pays cash a credit score isn't Needed.

The only reason a credit score is needed is to take on more debt and she obviously cant handle and doesn't need any more.
 
#28
Re: Need info about being a Co-signer for a loan.

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: rrflyer</div><div class="ubbcode-body">WTF does she need credit for? If she saves and pays cash a credit score isn't Needed.

The only reason a credit score is needed is to take on more debt and she obviously cant handle and doesn't need any more. </div></div>

Well everyone is entitled to their own opinion... lots of people use credit every day to buy things... I do it regularly. Lets you buy things you dont have cash for.

I can save for 5 years to buy a 70k car... or I can take out a loan and pay a small monthly payment and have it today, not 5 years from now... Why not? That money is going aside every month whether its going into a savings account or to a lender.

But that is off the topic and I feel I should get some popcorn going with this last post of mine.
 
#29
Re: Need info about being a Co-signer for a loan.

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: rrflyer</div><div class="ubbcode-body">WTF does she need credit for? If she saves and pays cash a credit score isn't Needed.

The only reason a credit score is needed is to take on more debt and she obviously cant handle and doesn't need any more. </div></div>

This guy made up his mind even before he posted his questions. He obviously doesn't want any advice that goes against what he was predetermined to do.
 
#30
Re: Need info about being a Co-signer for a loan.

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Slapchop</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: rrflyer</div><div class="ubbcode-body">WTF does she need credit for? If she saves and pays cash a credit score isn't Needed.

The only reason a credit score is needed is to take on more debt and she obviously cant handle and doesn't need any more. </div></div>

This guy made up his mind even before he posted his questions. He obviously doesn't want any advice that goes against what he was predetermined to do. </div></div>

My mind was made up, and I wasn't asking for advice (that the financial advisers persist on giving, in a derogatory way no less, despite my clearly stated question) I simply asked about possible effects in the worst case scenario..

My question was not "should I cosign" it was "what can happen if the payment is not made"


The situation is resolved, I have my answer, and there's no need for further posts telling me "dont do it" unless they are accompanied with information about what the lender might do in the case of an unpaid monthly payment.
 
#32
Re: Need info about being a Co-signer for a loan.

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: BamaLoaded</div><div class="ubbcode-body">Congrats on once having a 800 credit score. </div></div>

haha No longer an issue, the payments will be made by me.
 
#33
Re: Need info about being a Co-signer for a loan.

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: shankster</div><div class="ubbcode-body">Everyone I know has been burned.

I've been burned.....







Twice. </div></div>

VD doesn't count bud.. :)
 
#35
Re: Need info about being a Co-signer for a loan.

Eons ago a friend of needed to purchase a car while she was going to school; since I had an unused line of credit I gave her the money and she made the payments to the loan. If she couldn't make the payment I would cover it until she was able. Eventually the loan was fully paid and she's now an RN.
Would I do it again? most likely I would not; my CFO (wife unit) would frown upon it.
 
#36
Re: Need info about being a Co-signer for a loan.

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: ACK</div><div class="ubbcode-body">Eons ago a friend of needed to purchase a car while she was going to school; since I had an unused line of credit I gave her the money and she made the payments to the loan. If she couldn't make the payment I would cover it until she was able. Eventually the loan was fully paid and she's now an RN.
Would I do it again? most likely I would not; my CFO (wife unit) would frown upon it. </div></div>

Which one would your wife frown upon, loaning a girl some money or buying the girl a car so you could bang her?
 
#37
Re: Need info about being a Co-signer for a loan.

I had someone co-sign on a car loan when I was younger... man I feel bad because I ruined her credit. It was a really bad idea... but good luck! They had no idea their credit was getting destroyed until they went to get a loan for a car... ugh bad times.

Good luck!
 
#38
Re: Need info about being a Co-signer for a loan.

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Tomekeuro85</div><div class="ubbcode-body">Need info about being a Co-signer for a loan...A friend <span style="font-style: italic">(whos)</span> credit is ruined...I want to cosign for her, but I'm looking to safeguard myself...</div></div>This has FAIL written ALL OVER IT.

Good intentions sometimes make for poor decisions, but some people are destined to learn the hard way. Friends & loaning money are a bad idea...PERIOD.
 
#39
Re: Need info about being a Co-signer for a loan.

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: BamaLoaded</div><div class="ubbcode-body">The best way to handle it is to buy her a car, give it to her and let her sign a note with you, and make payments to you. If you can't afford to do that then you should not be considering this at all. This is the only way to ensure that your kid, best friend, relative, or someone that you just simply feel sorry for, does not ruin your credit without your knowledge. My wife is a financial officer at a bank, and I can tell you that without a good credit score in this economy, your screwed!</div></div>
This is good advice and one you could sleep easy at night knowing that all the payments to the bank will be made on time.
I would recommend that if you are in the position, to just find a decent car for a decent price and just pay for it out of pocket if you can.... And then draw up an agreement for her to make payments to you. Causing you to go into more debt is not exactly a wise move if you add interest into the picture and what happens if you loose your job or get seriously hurt. You are up a creek without a paddle.
It is your responsibility to safeguard your own family first and then help others second.
Just a thought.....
My eyes have been opened since attending a 13 week Dave Ramsey course......Pay cash for everything and no more loans except in buying a house and then that gets paid off as quickly as possible.
Hope this helps.....SmokeRolls
 
#40
Re: Need info about being a Co-signer for a loan.

http://www.hulu.com/watch/1389/saturday-night-live-dont-buy-stuff

So many people everywhere are just like these people on the video. Help her find a inexpensive car that she either has the cash for, or can pay off what's left in just a couple months and help her out that way. A car loan isn't going to repair trashed credit magically, it takes more than that.

Branden
 
#42
Re: Need info about being a Co-signer for a loan.

Go for it, what's the worst that can happen.
smile.gif
 
#43
Re: Need info about being a Co-signer for a loan.

Pm me and I will get her financed on her own .
co sign will not help her re establish her credit as much as on her own will.
 
#44
Re: Need info about being a Co-signer for a loan.

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Tomekeuro85</div><div class="ubbcode-body">Long story short,

A friend is looking to buy a car, but her credit is ruined.

SHe has had a heart condition since birth that costs lots and lots to keep under control and supervision. Because of this, she at one point was not able to afford her medical bills and school at the same time, so she picked to pay for her Master's.

Now her credit = down the tubes. Shes not financially irresponsible by any means, but she cannot get a loan anywhere after trying for a few months.

I want to cosign for her, but I'm looking to safeguard myself.. my credit is perfect, in the 800's and i want it to stay that way.

Though I dont expect something like this to happen,

1. what if she doesnt make a payment? Will they contact me first for money, or will they go straight to credit damage?

2. Price of the car isn't an issue. WORST case scenario if she bails, I could just pay it off, (its a sub $7000 car, very small monthly payments, she wants to do the loan to rebuild her credit)

3. Any other info that might help me out in a case of unfortunate circumstances?

Thanks! </div></div>

That's an awesome idea dude! Go to your nearest Cadillac dealer and get her one of this big fat Escalades. Maker her the primary on the loan.

You're a great friend.
 
#46
Re: Need info about being a Co-signer for a loan.

Well it's good to see the story of the Good Samaritan wasn't lost on some of the membership here....

To the OP, it can be done, your credit can be protected as this by no means is a sure thing disaster as long as you're able to take over the payments without a hitch or interruption in the process. Just get the details and the fine print up front and work it from there.

Good on you for looking out for your friend.
 
#48
Re: Need info about being a Co-signer for a loan.

Just an idea. You pay cash for the car and have her take out a loan in her own name to purchase it from you? If she cant make the payments that way then nothing falls back on you. Now I am no financial expert but does this does this make a sound plan for helping her credit and fully protecting yours?
 
#49
Re: Need info about being a Co-signer for a loan.

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: boom2336</div><div class="ubbcode-body">Just an idea. You pay cash for the car and have her take out a loan in her own name to purchase it from you? If she cant make the payments that way then nothing falls back on you. Now I am no financial expert but does this does this make a sound plan for helping her credit and fully protecting yours? </div></div>

No it doesn't unfortunately. What a lot of people are missing is that she needs it reported to the credit agencies that she is making regular payments. I don't think a private individual can do this.
 
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