If you co sign for a car loan, should your name be on the car title too?

Attorney Tom Olsen: Chrissy, here's a text and she says that she co-signed a car loan with her former boyfriend. I guess they're not together anymore. Her name is on the title to the car, too, and she wants to know whether she should remove her name from the car title. There's pros and cons to both. I would say this, that a reason to remove your name would be this, that if your former boyfriend has a terrible accident and he is underinsured, whoever he hurts can sue both the driver of the car, boyfriend, and the owner of the car, boyfriend and you, that would be a reason to remove your name from the car title.

There's also a good reason to not remove your name from the car title, and that would be this is, let's say you removed your name from the car title and your boyfriend quits making payments on that car title and the lender's been calling you up and saying, "Hey, I'm going to ruin your credit because this loan is not being paid." You're going to call me and say, "Tom, he's not paying the payments, can I go get the car?" The answer is no, because your name is not on the title.

Attorney Chris Merrill: No. Exactly. Once you remove it then you don't have the authority to sell, get it, do anything with it.

Tom Olsen: Exactly. If your name is on the car title and the lender calls you up and says, "Hey, by the way, your boyfriend hasn't made payments for two or three months," you're a co-owner of that car. Do not breach the peace but hey, you can go get that car, pull it out of the driveway and take it somewhere and make arrangements to sell it and pay that loan off.

Chris Merrill: You have far more control. Even if it's not in your possession, you have far more control than if you were not on the title at all. You really have no rights.

Tom Olsen: If you were going to do that, again, with safety in mind, okay? If you called your former boyfriend and said "By the way, you're not making payments, I'm going to come get the car," guess what? He's going to hide the car. You got surreptitious, if that's the word, go over there and take the car, and then you might want to report to the police, "By the way, I co-own this car with my former boyfriend. He lives at this address. I went picked it up because he's not making payments. If he reports stolen, it's not stolen. I've got it. My name is on the title. I have as much right to it as he does."

Let's go back a step and go get back to the basics, and that is never, ever, ever co-sign a loan for anybody. That includes your boyfriend, your partner and maybe especially your kids. You and I have lived by that rule and we will continue to live by that rule because we've seen so many parent-child relationships ruined because the parents co-signed loans for their kids or loan the kids money, and the kid said "I don't need to pay back, it's just my mom and dad. I don't have to pay them back." We've seen so many relationships go down the drain over money like that.

Chris Merrill: Absolutely. You're right, Tom. For that reason, because we have seen that with so many client situations, we also try to give guidance to other clients asking those questions and help them out.

Tom Olsen: If your child comes to you and says, "Mom, Dad, I'm desperate for a car, I've got to have a car to get to work. I'm working as hard as I can. I'm doing everything I can, I just can't get this done," and you as a parent decide, hey, you're right. She's working hard. She's trying to make ends meet, she's doing the best she can. We're not going to loan her money to give her car, we're going to give her money to get a car and if she ever pays us back, great. If she doesn't, that's great too. We consider it to be a gift.

That's the way my dad taught me to do it and that's the way we're going to live by. Just take that as a word of warning. Every once a while I do bits on the news shows, and one of those segments is what's a common reason why a parent disinherits one of their children. We have about three common reasons. One of those three common reasons is that they loan money to a child and that child never paid it back. As a child you may say, "Hey, Mom and Dad love me $10,000. It's just my parents, I'm not going to pay them back. Don't forget, your parents are ultimately going to determine what happens to their wealth when they pass, away and they may cut you out of their will over that.

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