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What happens to co-signers 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 financial calculators and tools, publishing original and objective content. This allows users to conduct studies and compare data for free — so that you can make informed financial decisions. Bankrate has agreements with issuers including, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are displayed on this site are from companies that pay us. This compensation could affect how and where products appear on this site, including for instance, the order in which they be listed within the categories of listing and other categories, unless prohibited by law. This applies to our loan products, such as mortgages and home equity, and other products for home loans. This compensation, however, does affect the information we provide, or the reviews that you read on this site. We do not include the vast array of companies or financial deals that could be accessible to you. SHARE: prostooleh/Getty Images

4 min read. Published September 30, 2022

Authored by Dan Miller Written by Points and Miles Expert Contributor Dan Miller is a former contributing writer for Bankrate. Dan covered loans, home equity and debt management in his work. Edited by Rashawn Mitchner. Edited by the associate loans editor Rashawn Mitchner is a former associate editor at Bankrate. The Bankrate promises

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This compensation could impact how, where and when products appear within listing categories, except where 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 your area or at your self-selected credit score range could also affect the manner in which products appear on this site. While we strive to provide an array of offers, Bankrate does not include details about every financial or credit products or services. Co-signing a car loan for a friend or loved one is a serious financial choice. It implies that you’re legally accountable for the loan payments in the event that the person you’re co-signing for fails to pay the loan. Along with placing your money at risk when you co-sign an auto loan, you’re also risking your credit. If the loan ends up in default or your car is eventually seized, your credit will be damaged, even if you have long-standing tradition of paying all your bills punctually. What happens when you have auto repossession When you contract a lease agreement or take out a loan for the purchase of a vehicle, you don’t actually own the car. The lender retains the title of the car until you have fulfilled the obligations you have made and repay the loan. In the paperwork you signed when you left with the car, you agreed to give the lender an option to take possession of your car if you stop making payments. Lenders generally only repossess cars as a last resort, if you’ve stopped paying and they believe there’s little chances that you’ll ever return to payments. The majority of lenders prefer to receive the money instead of going to the trouble of having to take the vehicle back. If you do find that a lender does decide to repossess your vehicle, they are generally not required to issue any notice. The lender may send a driver to drive the car away or hire a tow truck. If your vehicle is equipped with remote start it is possible that the lender might also block your ability to start the car. The laws in each state are different the state, it is generally the case that a lender is typically allowed to come onto private property to repossess the vehicle. But, it’s prohibited to break into the garage or damage the property. Can a co-signer repossess a car? It’s important to be aware that making efforts to cure a default on an loan yourself, aka «taking things into your own hands,» is not considered a legitimate substitute for legal action in most states. It is a court law to discourage the kind of physical confrontations that can occur in the event that you try to seize your friend’s car, so let the dealer or the bank take the car. The credit score of a co-signer is affected by repossession Being co-signing a loan makes you legally responsible for the debt. By co-signing the loan you have agreed with the lender that you’d ensure that the payments were paid even if the original borrower didn’t make the payments. So, late payments or repossession will be reported in your credit reports as well. Co-signer’s liability: As the co-signer on the car, you are in the position of being responsible for the debt until it is paid in full. The credit rating of your, available cash and the relationship you have with your delinquent co-signer are in danger. If things go wrong the three factors could be affected. Here are some reasons why you should be very cautious when deciding to co-sign. About who and what you are co-signing for. It’s a good idea to only co-sign for individuals that are close friends or family members you can trust. Ideally, these are who have a stable financial situation. To protect yourself from the event of a crisis, you may be thinking about creating an independent contract between you and the primary borrower. The contract should set out your expectations and define each person’s obligations. After the document has been signed by both parties, make sure it is notarized. Rights as a co-signer as a co-signer you are legally responsible for the debt, but you . You do not have a legal right to own the car or any other asset. If the principal borrower is in arrears with their car payments, you may think that you have the right to take possession of the vehicle yourself however, you don’t. One way to safeguard yourself while co-signing the loan is to stay one payment in advance. Contact the lender, find out what amount is delinquent (if there is any) and pay it, and then make a second payment. If your co-signer is late on another payment, any late payments will still count toward the balance, without affecting your credit score. It is just a matter of staying in contact with your lender and stay 1 month in advance. Another option is to ask to be taken off of the loan. The borrower who is the primary one must agree to the cosigner release, and they must also agree to the release of the cosigner. The lender will only grant approval if the primary borrower shows that they are able to pay for the loan on their own. Building credit after repossession Having the repossession appear on your credit report can make your credit score fall and will have a negative impact on your eligibility to obtain different types of loans. Repossessions for seven years, so you want to make every effort to make sure that the vehicle you co-signed for isn’t repossessing. Based on your relationship with the primary borrower, you might be able to negotiate a deal. You can try to request that they turn over ownership of the car while you make the remaining payments. When the car is fully paid you can trade it in and get some of your cash. You could try to sue the borrower who was your primary lender to get some compensation, but if they failed to pay the lender and then it’s likely that they won’t pay. Even if you win a judgment against them, you’ll need to be able to enforce it. It’s better not to allow it to get to that point. The bottom line Co-signing for the loan is a very risky decision as it puts your credit in danger. Before co-signing an auto loan or other type of loan, consider what you will do if the primary borrower fails to pay. Instead of co-signing, may consider working with them to find alternatives that don’t require a cosigner. If you’ve signed a loan and the borrower is in arrears with payments There are several alternatives. It is crucial to realize that you do not have the power to take possession of the vehicle yourself. Instead, you’ll need to either work something out with the primary borrower or continue making the payments for the lender. Find out more about:

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Authored by Points and Miles Expert Contributor Dan Miller is a former contributor to Bankrate. Dan covered loans, home equity , and debt management in his writing. The edit was done by Rashawn Mitchner. Edited by Associate loans Editor Rashawn Mitchner who was an associate editor at Bankrate.

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