How Do Late Payments Affect a Co-Borrower?

How Do Late Payments Affect a Co-Borrower?

Co-borrowers share responsibility for the auto loan, and both have rights to the vehicle. If one of you is responsible for making the car loan payments, and those payments are late, it affects both co-borrowers.

Late and Missed Payments on a Joint Auto Loan

When two borrowers go in on a car loan together, it’s called a joint auto loan. Both co-borrowers pool their income together to meet requirements, and are equally responsible to stay current on the loan. Both names are listed on the vehicle title, too, making both parties owners of the car.

While it’s common for co-borrowers to privately arrange who makes the car payment each month, the reporting activity on the loan affects both co-borrowers individual credit reports.

How Do Late Payments Affect a Co-Borrower?A late payment is defined as a payment submitted after the due date. A lender may not report a late payment if it’s only a day or two late, or may not even be reported until it’s 30 days late (a whole billing cycle). However, some lenders report late payments immediately – it depends on your lender and the language in your loan contract. Some lenders have late fees, as well.

Late payments can lower both co-borrower’s credit scores significantly once they’re reported. Payment history makes up 35% of your total FICO credit score. Once a payment is 30 days past due, it’s typically considered a missed payment, which can harm your credit score even more. Missed payments are usually categorized as either: 30, 60, 90, or 120 days past due.

After 120 days, the loan may go into default, and the lender could pursue the repossession process. The longer you let the late payment go unpaid, the more damage can be done to both of your credit reports.

Getting Out of a Joint Car Loan

Typically, co-borrowers are spouses or life partners. If you’re a co-borrower on a joint car loan and want out, then you have two main options to talk over with the other co-borrower:

  1. Refinance the vehicle – If your co-borrower wants to keep the car, and you want out, then refinancing the vehicle could be a good solution for both of you. Refinancing is done by paying off your old loan and starting another on the same car. Your co-borrower can apply for refinancing alone to see if they qualify. Once the vehicle is refinanced and the old loan paid off, your responsibility to loan is over.
  2. Sell the car – If the vehicle is sold and the loan is paid off, the contract is over. Both co-borrowers typically need to be present for the sale of a jointly-owned car, and both must agree to the sale.

To get your name off an auto loan, including a joint one, it needs to be paid off in some way – refinancing, selling the vehicle, or paying it off naturally throughout the course of the loan.

Need a Car Loan With Poor Credit?

Co-borrowers often take on an auto loan together to get a larger loan amount or combine their income to meet a lender’s requirements. But if you’re looking to get a vehicle by yourself and not worry about a co-borrower, then The Car Connection wants to help.

Borrowers with less than perfect credit can have difficulty locating a special finance dealership with bad credit lending resources. But thanks to our coast-to-coast network of dealers, we want to look for one in your area that assists bad credit borrowers. Complete our free auto loan request form to get started today!


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