Reasons why to never co-sign a car, boat or RV loan for someone.
Attorney Tom Olsen: Most of the comments are about, "Yes, Tom, I wish I'd known that early. I wish I'd followed your advice. I wish I'd never loaned my child money." Then there are also the ones that go something like this, "I know I shouldn't loan my child, but is it okay if I co-sign for their car loan?" [laughs] The answer is absolutely not, positively not.
Attorney Chris Merrill: Unfortunately that's worse.
Tom: It's probably worse because now not only are you at risk of losing your money, but you're at risk of losing your good credit if they fail to make timely payments.
Chris: Exactly. Correct. It means you'd be on the hook for the whole thing if they don't.
Tom: Now we're talking about your kids, but also if you've got a boyfriend, girlfriend and they have the bright idea like, "Hey, let's go buy a new boat. Let's go buy RV. Can you help me buy a new car? Will you co-sign a loan for it?" No, no, no, and no.
Chris: Unfortunately, why are we saying what we're saying? We get the phone calls from the parents that now they're like, "What can I do?" You know the answer, there's nothing.
Tom: Let me qualify that a little, baby, because this is the distinction I want to make and that is this is that, if you co-signed a car loan for somebody, whether it's your child or whether it's your partner, and their name only is on that car title and they don't make payments and you call me up and say, "Tom, what can I do?" Oh, yes, the answer is absolutely nothing. You're screwed. Is that too strong a word on the radio?
Chris: Right.
Tom: Sometimes they'll call us up and say, Tom, I co-signed the car loan for my former boyfriend, former girlfriend, and they're not making payments and both of our names are on the title. What can I do? I tell them, "Look, you've got equal rights to that vehicle. Go over there in a non-violent, non-threatening, non-confrontational way. Get in that car and drive it away, and make arrangements to sell it and pay off that loan." I'm not sure that this is great advice, but I have given this advice to people before.
When you do that you'd want to call the police or the sheriff or whatever vicinity the car is located in and say, "Look, I co-signed a car along for my boyfriend. He's not making payments. Both of our names are on the title. I'm going to go over there in the middle line. I've got keys of it. I'm going to drive that car off. By the way, if he reports is stolen it's not stolen. I've got it and my name's on the title, I've got a right to have it too." That way at least you've got some kind of remedy if you've co-signed this car loan and your name is on the car title too.
Chris: No, great advice in that at a minimum then you have an ownership-
Tom: You've got some kind of remedy.
Chris: -is what you're saying, which means that you have equal right to the whole vehicle. It doesn't change the fact that you could be on the hook for the whole thing. However, what you're saying if you are on the hook for the whole thing, at least you could turn around and you'd have a legal right to get the vehicle and then the legal right to sell it.
Tom: With some qualifications because when it comes down to car titles-
Tom: You got to need both.
Chris: -remember that if you've got two people on the word and-
Chris: You're going to need both.
Tom: -it's between your names-- requires both signatures. If the word or is between your names then either one of your alone could sell it.
Chris: Again, there could be issues, but at least what you're saying you got to have some leverage.
Tom: There might be somebody out there listening right now and say, "Tom, this is timely. Guess what, my boyfriend he wants to buy a motorcycle, he wants to buy a boat. He wants me to co-sign a loan for him. I'll just put my name on it. You're telling me we're good to go." No, I'm not saying that because remember that first of all if he fails to make payments it's still a big pain in the butt. Number two if by having your name on the car title remember if he hurts somebody with that motorcycle, that car, that boat-
Chris: Both of you.
Tom: -whoever he hurts they can sue both the driver and the owners. Putting your name on a title makes you personally liable for any damage done by that vehicle, that car, that boat, that motorcycle.
Chris: There's a lot of possibilities for liability by doing that-
Tom: We get back the basics.
Chris: -by doing the co-sign. The recommendation is don't do it.
Tom: Don't lend your money or your boyfriend or girlfriend money, and do not co-sign loans for your kids or your present partner.
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