Statistics show that co-signing for a friend or relative’s auto loan is quite common. In fact, according to a report by LeaseTrader.com, a national car leasing marketplace, there has actually been a 29 percent increase in the number of parents asking their adult children to co-sign for them. With the latest economic downturn, many people have found themselves in situations where they need help in the form of a co-signer when attempting to qualify for an auto loan.
Know the Risks
If you find your self in the position of being asked to co-sign on an auto loan, there are a few things to keep in mind so that you don’t get stuck paying for someone else’s auto loan. Make sure the person you are co-signing for will be able to keep up with the payments. They should have a steady work history, with enough financial income to afford the monthly payments.
Remember that no matter how responsible your friend or family member may be, life can often throw unexpected curve balls. If the person should lose their job, become ill or disabled, or even pass away, you are on the hook for the loan. Make sure that when you co-sign, you can afford the loan payment in the event that your friend or relative defaults on the loan.
It’s Your Loan Too
Other tips include maintaining copies of all loan documentation and payment schedules. You will want to know everything about the loan, including any information on late or missed payments. You have every right to know this information because it is basically your loan too.
Co-signing a vehicle for a friend or relative is a wonderful way to help them out. You may be signing because the person has bad credit, or because the person has no credit and you are helping them create a stable credit history. No matter why you are co-signing, it can be risky, so it is important to manage the loan. When you know the risks involved and manage the loan accordingly, co-signing can be a great way to help out your friend or loved one.
For more information in qualifying for auto loan financing, please click here.