Co-signing? - Calgarypuck Forums - The Unofficial Calgary Flames Fan Community

ruddstud · 01-26-2009, 08:24 AM

My sister in law wants us to cosign for a vehicle (20,000). Does this go on my credit report that I "owe" this money? Will it affect my ability to buy and sell our house? Are there ANY implications that might affect me getting credit etc????

STeeLy · 01-26-2009, 08:27 AM

I think Co-signing means (at least when I was renting property) is that if the person who is the primary signer does cannot continue payments, they would be coming out of your pocket... So unless your sister in law runs out of money completely and can't pay, you should be ok.

CaptainCrunch · 01-26-2009, 08:31 AM

Just be careful, the above poster is right, your responsible to make good on the car loan if your sister in law defaults.

Unless she's young and has no credit, I would be a little leery.

FireFly · 01-26-2009, 08:47 AM

See, when I went in for a consolidation loan, the bank told me that they would need a co-signer. This would have been my parents and it would have solely been on their credit and affected their credit rating. Mine would not be affected either positively or negatively as it would be their credit I was using.

CaptainCrunch · 01-26-2009, 08:53 AM

Quote:

Originally Posted by FireFly

See, when I went in for a consolidation loan, the bank told me that they would need a co-signer. This would have been my parents and it would have solely been on their credit and affected their credit rating. Mine would not be affected either positively or negatively as it would be their credit I was using.

Thats correct, basically when they require a co-signer its because your credit isn't good enough to secure da money, so they need someone who has good credit to secure the loan.

I had to get my folks to co-sign for my car loan after I got out of school because I had no credit whatsoever.

Rathji · 01-26-2009, 08:54 AM

My policy has always been that to co-sign for someone, including family, it needed to be a short term loan, where I held collateral that could easily be sold for a large portion of the loan amount.

Even though they are family, and they have full intention to pay it back, you should get legal protection in the case that they are totally unable to repay it. For example, they cannot work due to serious injury, or they die, or any number of random events out of their control.

If it was me, I would put a lien on the car for the total amount, or tell her that if she can't afford to do it herself, 20k is a bit much to be spending on a car.

Ice · 01-26-2009, 08:56 AM

Co-signing is reported on your credit because it can become an obligation of yours. Lenders can use it to calculate your debt ratio which could affect your ability to qualify for loans.

stang · 01-26-2009, 08:59 AM

I wouldnt do it... but thats just me

MoneyGuy · 01-26-2009, 09:52 AM

Co-signing is very dangerous. I've seen it turn out really nasty. You can be on the hook for the money and it can kill your relationship. I wouldn't do it.

jtfrogger · 01-26-2009, 09:54 AM

I personally wouldn't touch it. I would only consider co-signing on something that was a necessity not a luxury. Although you could argue that a vehicle is a necessity for some, I believe that a new vehicle is a luxury. If she don't have enough credit to buy a new vehicle, she should probably consider a used one.

If she needs a co-signer to by a $5,000 used vehicle, then maybe I would do it.

But this is just my opinion.

STeeLy · 01-26-2009, 09:56 AM

Get her parents to co-sign for her if possible...

Flash · 01-26-2009, 10:00 AM

I wouldn't do it. There's no reason she needs a $20,000 car...if she's young and has no credit she should start off with a cheaper vehicle. If she's older and has bad credit, then there's no way I'd co-sign. There's a reason she's got bad credit and it's not because she was great at making her payments on time.

ken0042 · 01-26-2009, 10:02 AM

Some good advice in here. I would also add that if you do go through with the co-signing, that it isn't on a new car but a used car instead. Reason being is depreciation- a new car with a $20K loan is going to be worth $15K in 6 months when she defaults, but a $15K used car will be worth $14K in 6 months.

Or if you do co-sign for a new car, make it a condition that she get "purchase price" insurance on the vehicle. So if it gets written off, the loan can be paid in full.

And of course if you cannot afford a new car on your own (ie-credit bad enough that you need a co-signer) she can always buy a $5K car. Or for that matter she can go into one of those "we finance everybody" places and pay 15-20% interest. That's what I had to do when my credit sucked- it's part of the cost of rebuilding your credit.

STeeLy · 01-26-2009, 10:13 AM

Quote:

Originally Posted by Flash

I wouldn't do it. There's no reason she needs a $20,000 car...if she's young and has no credit she should start off with a cheaper vehicle. If she's older and has bad credit, then there's no way I'd co-sign. There's a reason she's got bad credit and it's not because she was great at making her payments on time.

I agree with this... as well as some other posters... If where she works, goes to school, etc... is accessible by bus, there is absolutely no reason she needs a car, let alone a $20000 one. I would understand that carrying groceries and such will be a pain on the bus, but that does not justify 20 000+ car. There are some really cheap used cars that are still in good condition out there, tell her to get one of those instead.

Mike F · 01-26-2009, 11:07 AM

One misconception to clear up is that you do not become liable for the debt only if the person for whom you've cosigned can't pay.

Co-signing entails you entering your own seperate but related agreement with the lender. Under that agreement, you'll be acknowledging that the lender need not make any efforts to collect from the main borrower before coming after you for the debt. Obviously they won't come after you as long as payments are being made (they'll like making the interest), but that doesn't change the above.

It's a serious commitment, not to be entered into lightly.

mykalberta · 01-26-2009, 11:12 AM

I sympathize with your position. If I had a wife and her sister needed us to cosign, it would be very difficult to say no because of the inter family relations.

I personally would talk with your wife on this and make sure all negotiations go through here. I would definately force her to get insurance on the vehicle if she cant make the payments.

I personally would advise her that she lease instead. If she can afford it then there shouldnt be a problem.

Hemi-Cuda · 01-26-2009, 11:26 AM

another co-signing question, my dad co-signed for me when i bought my condo. now i've lived there for almost 2 years never missing a payment, is there anyway to get his name removed from the place so that all the liability is on me? i figure when the bank can see that i'm able to make payments for a long period of time, they should be ok with removing the co-signer

mykalberta · 01-26-2009, 11:31 AM

Quote:

Originally Posted by Hemi-Cuda

another co-signing question, my dad co-signed for me when i bought my condo. now i've lived there for almost 2 years never missing a payment, is there anyway to get his name removed from the place so that all the liability is on me? i figure when the bank can see that i'm able to make payments for a long period of time, they should be ok with removing the co-signer

I am in same position, I have owned mine for 3 years. My bank (PCF) basically told me I could change it once the mortgage term ran out (I got a 10yr fixed at 5.05 so not for a while for me).

Finner · 01-26-2009, 11:43 AM

Quote:

Originally Posted by ruddstud

My sister in law wants us to cosign for a vehicle (20,000). Does this go on my credit report that I "owe" this money? Will it affect my ability to buy and sell our house? Are there ANY implications that might affect me getting credit etc????

Absolutely it will affect your credit. Its basically the same as you going in and applying for a $20000 loan on your own. It will definitely affect the amount you can get for a mortgage assuming you are over 8% in debt servicing costs. If she misses payments and they can't get a hold of you it will ding both your credit ratings, not just hers.

I would only do this in certain situations. Be careful.

Deegee · 01-26-2009, 12:38 PM

I know with us, a Credit Union, that when you co-sign, it is really just a joint loan and we can and will go after either one of you for payments.

I also know if you can prove that the loan you cosigned for has been paid as agreed for the past year then we can look at backing that out of your debt servicing.

$20,000 is a lot of risk for someone to stick their neck out on cosigning.

If her credit is that poor tell her to save money and buy a beater. Tell her to get a cash secured mastercard to rebuild her credit while you're at it.