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What happens to a co-signer in the event of a vehicle being repossessed? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial decisions by offering interactive tools and financial calculators that provide objective and original content. We also allow users to conduct studies and compare information for free – so that you can make sound financial decisions. Bankrate has partnerships with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make money The products that appear on this site come from companies that compensate us. This compensation may impact how and when products are featured on this website, for example for instance, the order in which they may appear within the listing categories and other categories, unless prohibited by law. Our mortgage, home equity and other products for home loans. This compensation, however, does affect the content we publish or the reviews that you read on this site. We do not include the vast array of companies or financial offerings that might be accessible to you. SHARE: prostooleh/Getty Images

4 min read. Published September 30, 2022

Dan Miller Written Dan Miller Written by Points and Miles Expert Contributor Dan Miller is a former contributing writer for Bankrate. Dan wrote about loans as well as home equity, and managing debts in his work. Written by Rashawn Mitchner. Edited by the associate loans editor Rashawn Mitchner who was an associate editor at Bankrate. The Bankrate promises

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So, this compensation can influence the manner, place and in what order items are listed and categories, unless it is prohibited by law. We also offer mortgage, home equity and other home lending products. Other factors, like our own website rules and whether or not a product is offered in the area you reside in or is within your personal credit score could also affect how and where products appear on this website. While we strive to provide the most diverse selection of products, Bankrate does not include the details of each credit or financial product or service. Co-signing an auto loan for someone you love is a serious financial choice. It implies that you’re legally responsible for making the loan payments if the individual whom you’re cosigning for does not make the payments. Along with putting your cash on the line when cosigning an auto loan as well, you’re also putting at risk your credit. If the loan is in default or the car is ultimately repossessed the credit of your client will be affected, even if you’ve had an extensive tradition of paying all your bills in time. What happens when you have auto repossession When you contract a lease or purchase the purchase of a vehicle however, you do not actually have ownership of the car. The lender retains the title to the car until you meet your obligations and repay the loan. As part of the documents that you signed as you left with your car, you agreed to give the lender permission to seize the car if you cease paying the loan. Most lenders will only repossess cars as a last resort if you’ve stopped paying and they think there’s little chance that you’ll be able to return to payments. Many lenders would rather receive payments rather than going with the stress of bringing the vehicle back. If the lender does decide to repossess your car, it’s generally not required to give you any sort of notice. The lender could send a driver to take the car away or may employ an tow vehicle. If your car has remote start it is possible that the lender could also block your capability to start your car. The laws in each state are different however, it is generally the case that a lender is generally allowed to access private property to repossess the vehicle. However, it’s usually prohibited to break into the garage or cause damage to the property. Can a co-signer repossess the vehicle? It’s crucial to understand that making efforts to cure the default on an loan yourself, aka “taking things into your own hands,” is not considered a legitimate alternative to legal action in all states. Courts have this rule to prevent the type of physical conflict that could occur in the event that you try to seize the car of a friend, therefore let the dealer or bank seize it. How the credit of co-signers is affected by repossession co-signing makes you legally responsible for the debt. By co-signing the loan and committing to the lender that you would ensure that the payments were paid even if the original borrower failed to pay the payments. That means that late payments or repossession will be reported in your credit reports as well. If you are the co-signer for the car, you are in the position of being responsible for the debt until it’s completely paid. The credit rating of your, available cash , and your relationship with the co-signer you have a problem with are at risk. If the situation is not good and you are not careful, all three factors could be affected. These are a few reasons why you should be cautious when signing to sign a co-signer. About who and what you are co-signing for. It’s best to co-sign only for people who are close to you or relatives you trust. It is ideal to choose those who have a stable financial situation. To safeguard yourself in such situations, you might think about establishing a separate contract between yourself and the principal borrower. This document will set out your expectations and define the respective obligations. Once this document is signed by both parties, make sure it is notarized. Rights as a cosigner a co-signer, you are legally accountable for the debt but not you do not have any legal rights to the debt . There is no legal claim to the ownership of the car or other property. If the primary borrower falls behind on their car payments and you think you are entitled to seize the car on your own however you don’t. One way to protect yourself when co-signing the loan is to stay one payment ahead. Contact the lender, find out what amount is in arrears (if there is any) and then pay it and then make a second payment. If the co-signer makes a second late payment the late payment will still count toward the balance, without affecting your credit. You just need to keep contact to the lender and make sure you are 1 month in advance. Another option is to request to be taken off of the loan. The borrower who is the primary one must sign a cosigner release as well as it is the lender will only approve in the event that the primary borrower can prove that they are able to repay the loan independently. Credit repair after repossession the repossession appear on your credit report will result in your credit score to fall and will affect your ability to get or different types of loans. Repossessions for seven years and you should take every step to ensure that the car you co-signed for doesn’t get taken away. Based on the relationship you have with the primary borrower, you may be able to negotiate a deal. You could ask that they hand over ownership of the car while you make the remaining payments. After the car has been fully paid, you could trade it in and get some of the money. You could try to sue the borrower who was your primary lender to seek compensation for damages, but if they failed to make payments due the lender, then it is unlikely they would pay you. Even if you get an order against them, you’d need to be able to apply it. It’s much better to not let it reach the point of being able to enforce it. The bottom line: Co-signing the loan is a risky thing to do, and it puts your credit on the line. If you are considering co-signing for an auto loan or other type of loan, consider what you’ll do in the event that the primary borrower defaults. Rather than co-signing, you might look into working with them and looking for options that don’t require a co-signer. If you’ve signed a loan and the primary borrower is in arrears with payments there are a number of alternatives. It is crucial to realize that you do not have the power to take possession of the vehicle on your own. Instead, you’ll need to work out a solution with the primary borrower or continue to pay the loan for the lender. Learn more:


Written by Points and Miles Expert Contributor Dan Miller is a former contributor to Bankrate. Dan covered loans as well as home equity and managing debts in his writing. The edit was done by Rashawn Mitchner. Edited and written by associate loans Editor Rashawn Mitchner who was an editor in the associate department at Bankrate.

Associate loans editor

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