Having good credit is a positive attribute that could endure you to lenders. It could also make your relatives and friends turn to you to cosign a loan. While doing so could help a loved one, there are many risks involved. For instance, if you cosign a car loan, are you liable for accidents? What effect will a cosigned loan have on your credit?
Cosigning a loan is a common practice in the lending world. It allows you to help out someone who the lender considers to have bad credit. However, it can also expose you to certain risks. This is why you should explore all the merits and merits before cosigning a loan.
A Houston Car Accident Attorney can answer any questions you have about your eligibility in a car accident. Contact Husain Law to learn about your rights.
Who Is a Cosigner?
Not everyone has a good credit score. For such people, getting approved for a loan can prove difficult. A cosigner increases the odds of someone with bad credit getting a loan. They usually have a lengthy credit history and a good credit score. Essentially, a cosigner agrees to pay the borrower’s loan if the borrower defaults on it.
A good number of borrowers would have a hard time getting first-time credit without cosigners. However, cosigning holds many risks for the cosigner.
Cosigning on an Auto Loan
If you cosign an auto loan, you commit your credit to it. This means that you agree to pay it off should the primary borrower default. You can cosign an auto loan for a family member or close friend. Generally, you are only responsible for the loan, not what the primary borrower does with the car.
Co-signer Responsibilities
Accepting to co-sign for a car loan means you’re prepared to help someone. Although it’s a selfless act, it’s necessary to understand the risks and rewards involved, including:
Shared Duties
When you decide to co-sign, you agree to sail in the same boat as the original borrower. That means if they default a payment, the burden falls straight on your shoulders. This can put your credit score on the line, making future borrowing challenging.
Debt Obligation
A lender can hold you liable for money owed. If the borrower fails to pay the amount, the lending institution will come for you. This reality can lead you to significant financial burdens.
Co-signer Rights
Deciding to guarantee someone for a vehicle loan is crucial. While it’s a good thing to help a friend own their dream car, this selfless act can put your own financial stability on the line. Here’s a break-down of your rights.
You Don’t Own the Car
As a co-signer, you agree to carry the borrowers’ auto loan if they’re unable to pay. But you have no ownership rights to the car, even when things go wrong. The primary borrower still owns the vehicle, and can sell or trade it in.
Facing Collections Before the Initial Owner
If the borrower defaults on payment, lenders will come after you first. This means you could face debt collectors before the original owner is pursued. This can have a serious impact on your credit score.
Potential Removal from the Loan
Some lenders allow a co-signer release after a specified number of timely payments, excluding you from the loan. This allows you to minimize your financial burden and avoid permanent responsibilities.
LIABILITY AFTER A CRASH
As mentioned, cosigning an auto loan does not make you liable for what the primary borrower does with the car. You will not be held responsible for any accidents resulting from the driver’s negligent acts. However, you are liable for the loan payments, which could pose a problem if the driver is sued.
Consider a situation where the primary driver is sued for damages in a drunk driving accident. If they end up paying a lot of money in suit settlements, they might lack enough money to pay off the car loan. This will leave you to make the loan payments.
Learn More: What to Do After a Car Crash
LEGAL ACTION
In the above example, the lender could sue you for unpaid loan payments if the primary borrower defaults the loan. If they are successful in court, you could have your wages garnished, and bank account levied. The court could even put a lien on your car until the loan is paid. Records of such legal actions will then appear on your credit report.
CONSULT WITH A HOUSTON CAR ACCIDENT ATTORNEY
If you cosign a car loan, are you liable for accidents? Generally speaking, you shouldn’t be held responsible for an accident if you weren’t driving the vehicle when it happened. Liability typically falls on the driver, not the owner, except in certain situations.
However, if the primary borrower gets sued for an accident and defaults on the loan, you will be responsible for making the loan payments.
Contact Husain Law to discuss your liability with an expert Houston Car Accident Attorney, Explosion Lawyer and Airlines Injury Lawyer.
Read More: Looking for a Houston Car Accident Lawyer?
FAQs:
Is a Co-signer Responsible for Car Insurance?
The responsibility of car insurance doesn’t directly lie with co-signers. Which means, they can’t be sued for injuries caused by an accident involving a negligent borrower. Their major obligation lies in loan repayment.
How Much Car Insurance for a Co-signer?
Guaranteeing a car loan doesn’t affect the co-signer’s car insurance cost. Their own insurance history and driving record is what influences their premiums. If the co-signer plans to drive the vehicle, they may be included on the policy, which increases the premiums.
How Many Cars Can You Cosign For?
There isn’t any limitation on the numbers of cars you can cosign for. Lenders often consider your credit record and income to figure out your status. But as cosigner, you need to weigh the risks and consequences involved because you’re responsible for the payment of the debt.
