Confession of a Co-Signer

[wing117]

I must confess that I haven't been 100% honest in reporting my financial picture due to my own views on a situation. I'd like to use this example as a warning to others to not do what I did.

I co-signed on an auto loan with a 'friend' back in Nov. 2007. I never calculated in this burden as it was "the other person's problem".

Ah, the mistake of 6+ years ago came back to bite me hard this week. I grabbed a credit report this weekend and saw a delinquent account on there being past-due by 120 days(!!). By some stroke of wonder after all this time he still owed 4.3K on the loan and was behind by a total of 128 days - owing 2K in back payments. Needless to say my credit has taken a huge dive bomb due to this.

I took immediate action, calling the credit union and getting the payoff quote and calling up the 'friend' and convincing him to sign a legal repayment contract for a personal loan with myself for the amount of the pay off with a small claims court clause in there for good measure if he goes into default (and all the other legalese like acceptable payment methods, due dates, late fees, etc...). Once the contract was signed by both parties this morning, I paid off the loan. This is literally the last thing over my head and it's been a 6 year burden that I've been ignoring because "I'm just the co-signer" and didn't take responsibility for it. It's damn shameful.

So the take away from this, as I'm sure most of you already know: Don't co-sign anything. If you do, do so only with the expectation that you will end up paying the entire loan and still have no claim on the property. There is no way out of the responsibility once you sign it and can seriously mess up your credit and finances.

Luckily thanks to this site and community I was able to take immediate action, and although it hurts to do it, it has only set me back a month and half on my savings goals.

I don't expect to get all of my money back from paying off the loan but 4.3K is a small price to pay for this mistake rather than let the loan go into default with a repossession on my credit history for 7 years.

[arebelspy]

Yikes.

Thanks for sharing.

Well done being badass enough to have gotten yourself into a situation where it was no big deal, you could pay it off and move on.

[Purple Economist]

Did you request the lender that held the loan to remove the "hit" from your credit report as a condition of your paying off the loan?

[Unionville]

 I learned this from the Dave Ramsey radio show.  He defines a cosign as "the bank really does not believe they will get paid back because the person is such a high risk."  So I ask myself (and have explained to others) why should I take on a responsibility that the bank won't even take on? 

Sorry this happened to you.  Dave Ramsey also calls this "stupid tax" -- rather than get mad about it, write it up as a learning experience.  We've all done those things.

[Sofa King]

Dave Ramsey is great! Love his show!!!

[soccerluvof4]

Your not alone..! I have heard many stories like this which is why i wont do it not to mention the loss sometimes of a good friend. Having said that I agree it was awesome you shared the story and had the badass to address it full on.  We all have made mistakes but sure you learned from it.

[wing117]

Did you request the lender that held the loan to remove the "hit" from your credit report as a condition of your paying off the loan?

Not in writing, but I talked with the loan officer of the Credit Union and asked for a "goodwill adjustment" and because of the severity of the delinquency she wasn't willing to discuss it. Live and learn. Everything else on my credit is 100% perfect, so I'll just build it back up.

[Milspecstache]

Thanks for sharing.  I hear of co-signing often (from coworkers talking about it in a good way) but rarely hear enough of the bad stories.

Congrats on getting out of it in a very MMM-way.

[MrsPete]

When I needed a first car and had no credit, my grandmother co-signed for me.  She explained to me in very exact terms that this could end in two ways:

1.  I'd pay the loan off, I'd be on my way to good credit, and I'd never need a co-signer again for the rest of my life. 
2.  I'd fail to do what was expected, she would take the car and sell it, my credit would be crap, and she would never co-sign for me again.

I did exactly as she told me, and I never had any problem getting credit again (though now I'm at the point that I don't need it anymore). 

I intend to follow her example and co-sign ONCE for each of my daughters.  They'll get the same lecture, and I expect they'll behave just as I did.