Does Co-Signing for a Family Member’s Car Loan Ruin Your Finances?
When a wealthy person gives an entrepreneur a gift of money for a business venture and asks for nothing in return unless the business project becomes profitable, it is called being an angel investor. If the 99 percent had angel investors to bail them out of current and future financial problems, debt relief lawyers would spend much of their workday twiddling their thumbs. Instead, they rely on friends and family who can help in whatever capacity they can, whether it is pooling their money in a rotating savings and credit association (ROSCA) or susu, buying groceries in bulk and splitting the costs, or simply providing transportation or childcare on an as needed basis whenever they have the wheels or the time. Next time you are in traffic, look around at all the cars, and you will probably see some that are only there because a family member of the driver co-signed on the loan; everyone needs a car in Florida, regardless of whether they can qualify for a loan. On the one hand, co-signing on a loan is evidence of the power of family ties or of friendship. Likewise, in the best-case scenario, both the driver and the co-signer get a credit score boost once the loan is paid off. On the other hand, if something goes wrong, then both the driver and the co-signer take a financial hit. By being an angel borrower and co-signing on a relative’s car loan, you are making yourself financially vulnerable. If you put your financial stability on the line to help someone you love get a car loan, and now you are feeling the financial sting, contact a Plantation debt lawyer.
How Co-Signing Works
When a borrower cannot qualify for a car loan based on his or her own credit history, the borrower can ask a family member, or any other trusted person, whose credit is good enough to co-sign on the loan agreement in order to qualify. When all goes well, the co-signer’s only responsibility is to sign on the dotted line. The borrower makes all the payments until the loan is paid off. If the borrower misses a payment, however, the lender can seek payment from the co-signer. Plenty of friendships have turned sour and family gatherings have become awkward after a co-signer had to bail the original borrower out of a missed payment. In the worst cases, the co-signer cannot come up with the money, and the borrower and the co-signer default on the loan, leaving them both with no money and no car.
Legal and Financial Risks of Co-Signing on Someone Else’s Loan
Defaulting is not the worst thing that can happen when you co-sign on a car loan. If the borrower causes an accident, it is highly unlikely that the insurance companies will assign any of the fault to the co-signer. If the accident is so bad that someone injured in the accident files a personal injury lawsuit, though, the injured person can name the co-signer as a dependent.
Work With a Debt Lawyer About Dealing With the Fallout From Co-Signing
A South Florida debt lawyer can help you if co-signing on a family member’s car loan made your debt problems worse. Contact Nowack & Olson, PLLC in Plantation, Florida to discuss your case.