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Co-signer has obligations, not rights

Dear Dr. Don,
What rights does a co-signer to an automobile loan have? Are they an owner as well as a co-borrower? -- Anxious Ann

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Dear Ann,
The co-signer doesn't have many rights, just obligations. The co-signer is listed on the loan but isn't necessarily listed on the title as co-owner of the vehicle.

There are pluses and minuses to not being on the title. As a co-owner you could be responsible for accidents or tickets. Since the lender has first dibs on any equity as long as they have a lien on the title, the main advantage in being on the title is in having some leverage with the primary borrower, if they stop making payments.

The Federal Trade Commission's Facts for Consumers series has a pamphlet on co-signing a loan, that has my favorite quotation concerning co-signing, "When you're asked to co-sign, you're being asked to take a risk that a professional lender won't take. If the borrower met the criteria, the lender wouldn't require a co-signer." That's a good reason to think twice before co-signing.

Getting the lender to agree to notify you in writing if the primary borrower misses a payment gives you time to deal with the issue before a late payment hurts your credit report. It's also a good idea to get a copy of the loan agreement. If you can't get the lender to agree to notify you in writing, you may be able to check on the account history at the lender's Web site. Make a point of checking on the payment, monthly.

Bankrate.com's corrections policy
-- Posted: Aug. 19, 2005
More Q&A stories from Dr. DonAsk a question
 RESOURCES
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