A cosigner can do many things to help boost a borrower’s ability to get a car loan approval. But, beyond that, and agreeing to make payments if the borrower can’t, a cosigner’s rights are limited.
The Rights of a Cosigner
That’s not to say a cosigner doesn’t have any rights. But, the ones they do have don't give them the ability to take ownership of the vehicle. A cosigner doesn't own the car because their name isn’t on the title.
More so than rights, a cosigner has responsibilities. That’s because, as a borrower, you’re also “borrowing” the good credit from your cosigner, and they’re agreeing to be responsible in case you fall behind on your car payment. This can really give you an advantage if a lender is on the fence about approving you for an auto loan.
A lender takes your cosigner's credit into account, along with the other requirements you must meet, in order to approve you for a loan. In helping you, your cosigner is also giving you a chance to build and improve your own credit with each on-time payment.
Be sure your cosigner knows what they’re getting into before they place their signature alongside yours. A cosigner's responsibility comes with risk as well, as their credit is tied to your loan. Anything that happens with it – either good or bad – reflects on you and your cosigner’s credit, and you share the consequences as well. This means that if you stop paying, the lender can come after your cosigner for money owed, even after repossession.
Cosigner Rights After Repossession
When things go wrong is where many of the rights of a cosigner come into play. Most of the rights a cosigner has relate to processes that happen after vehicle repossession. According to legal website Nolo.com, cosigners share many of the same rights as the borrower.
- The right to receive written notice about the car including:
- Your right to redeem and when you can.
- Your right to reinstate, if applicable, and when you can.
- Notice of private sale and when it’s taking place.
- Notice of auction including where and when it’s scheduled.
- A description of any money still owed after the sale of the car, or money owed to the borrower.
- If the creditor doesn’t sell the vehicle in an honest and fair manner, following standard resale practices, a cosigner has a right to challenge the creditor’s claim to a deficiency balance (money still owed).
- If a creditor repossesses the car but doesn’t sell it, the cosigner reserves the right not to be sued for any loan balance.
- If the cosigner or primary borrower is in military service at the time a creditor attempts to repossess the vehicle or collect a debt from the cosigner, the cosigner may have some of the same rights as the borrower under the Servicemembers Civil Relief Act of 2003.
- If a cosigner files bankruptcy, a creditor may not collect money owed from them. However, if the primary borrower files bankruptcy, the creditor may still collect from the cosigner.
A Note About Cosigner vs. Co-borrower Rights
A cosigner shouldn't be confused with a co-borrower. Co-borrowers are individuals, typically a spouse, whose finances are added to your own in order to meet the lender’s income requirements. They also differ from cosigners in that their names are also on the car title. This means they share ownership, rights, and responsibilities for the vehicle and either of them can legally have it in their possession.
Get on the Right Track
If you need a car but worry your credit isn’t good enough to go it alone, just make sure you and your cosigner go into the arrangement fully aware of the situation. Having a cosigner can be a great benefit, and it doesn’t have to be permanent. If your credit improves enough after the first few years of your loan, you may be able to refinance and go it alone.
Regardless of whether or not you need a cosigner, you do need to make sure that you’re working with the right lenders. Not all lenders have the ability to work with people who have credit issues. If you don’t know where to go, The Car Connection can help.
We work with a large network of special finance dealerships that have the lending resources you need. Just fill out our fast, free auto loan request form today, and we’ll get to work matching you with a local dealer.