Are there any alternatives to co-signing an auto loan for my son?
What alternative is there to co-signing an auto loan for my son. My financial advisor mentioned that there might be a way to offer financial support without being a co-signer. Is there another option? I am 78 years old, retired, with a modest investment plan. I would like to help my son, but don't want to end up paying for his car.
Hi! The other advisors have some great ideas! My husband and I, like you, want to help our adult kids financially when we are able. But, as you are aware, once you co-sign a loan, you become responsible for it even if your son didn't mean for you to. So you are wise to think hard about co-signing.
In addition to the other advice given here, he could take out the loan and you could just help him pay part of the monthly payment each month or whatever months he needs it until he's able to manage on his own or until the loan is paid off. If, as advisor Shannon wonders, your son needs a bigger down payment than he has to qualify for the loan, you could give him that money, but keep your name off the paperwork. If he has had difficulty in the past with loans and credit, and is basically unable to borrow money at all without a co-signer, then you would be even more reluctant to put your name on a loan because if he continues to have trouble, you will have to pay off the loan yourself, which could be a problem on a retirement income. If that is the case, I would recommend that your son get a very cheap used car that perhaps you give him the money for and then he works toward building his credit. You're a good mom!! Thanks for writing.
It’s only parents’ nature to help our children, and there may be some smart ways to do so without jeopardizing your finance. For example, instead of co-signing a loan, you could enlist a CPA/attorney’s help to draft an intra-family loan that specifies the terms of the loan, the interest rate without running afoul of the IRS rules, and penalties for not making the payment on time. The success of the intra-family loan is ultimately depending on your son’s financial prudence and income stability. Best!
I assume that without your cosigning, your son will not qualify for the car loan or may have to pay a higher interest. If that is the case, you should consider gifting some money to him and he can use it to put a higher down payment on the car and, thus, is more likely qualify. Or, he can use your gift to purchase a used car he can afford.