What are my options if I cosigned on an ex-girlfriend's car loan and she is behind on payments?
I currently owe about $10,000 on my car which I have no problem paying for. I am a cosigner on my ex's car loan. She owes $11,000. We tried to refinance back when we were together a few months ago to get my name off but the loan was upside down. She is behind on payments and I have been receiving calls urging me to pay. I can’t afford two car payments. What are my options?
What a difficult lesson to learn. For others reading this, do not ever cosign a loan unless you are ready, willing and able to take it all on as your own.
This needs to become a priority. Why is she behind on payments? If she has any income at all, this needs to be the first use of those dollars, before anything else. If she has direct deposit by her employer, you could have her direct deposit the amount of the payment into your checking account so you can be sure the payment is made. Employers do not care whose account they deposit to as long as the employee gives them the bank routing and account numbers. Then maybe if the lender is getting payments, they will let the past due amounts carry for a while. If she needs to get a second job, then that's what she needs to do.
In the meantime, to protect your credit, maybe you need to get a second job and pay this until you can get the car from her and sell it. Use the proceeds to pay off the rest of the loan. She will still owe you for what you put into it yourself to get out from under.
As an alternative, if you can both get extra funds, either from second jobs or borrow from friends or relatives, pay just enough to get the loan down to what the car is worth and let her refinance it. However, her ability to refinance is diminshing every day that her credit score worsens due to this situation.
Sometimes desparate times call for desparate measures. This needs to be paid before either of you spend money on anything else but food, and that needs to be raman noodles and hamburger.
In short, act immediately to protect your own credit, get the car or the money from her, or both. It may be helpful to consult with a non-profit credit counseling service, but I wouldn't spend too much money on this because the lender is simply acting on the contract you signed with them. Your primary problem is with your ex who has not taken her responsibility to the lender or to you very seriously. I wish you well.
There are only a few options you have available to you in a situation like this, and none are particularly enjoyable. Unfortunately, as a co-signer on the loan, your options are very limited as you have promised the bank you will be legally responsible for the loan. Letting the car get repossessed is a terrible prospect because the bank will likely get 20% to 40% of what the car is worth and the bank will then sue you and your ex for the remaining loan balance. Three possible 'solutions' are below, but you probably want to talk with a lawyer, a financial advisor, or a non-profit consumer credit counseling service before acting on any of them.
Your first option would be to try and work with your ex to sell the car and use the proceeds to pay off as much of the loan as you can. To incentivise her to cooperate you may need to offer to split the remaining loan balance with her. Unfortunately, you'll still be at her mercy to pay off the rest of the loan balance but at least you will have reduced the loan amount by the maximum possible amount.
The second option would be to talk with the bank to see if they have any special programs. It's likely you have already done this and they won't cooperate, but it will open a conversation with them. You can offer to pay off the deficiency balance (the leftover loan after the repo) if they remove the negative comments from your credit report. Then, you would need to sue your ex in small claims court to get the money back.
A third option is to work with the bank and/or sue in court to take full legal ownership of the car and remove her from title, You would then have the ability to sell the car yourself without her being involved. Of course, you would still be responsible for the leftover amount and would need to sue her to get any money back.Taking full ownership of the car could also weaken your case in court against your ex.
Tough one. Now you understand that there are compeling reasons for legal marriage.
The loan must be repaid or the car will be repossessed, with a significant blot on your credit reports. Are you willing to let that happen? If not, consider having a business meeting with her to see exactly what she can commit to, and what balance you'd be stuck with. I mean business meeting, too: preferably in someone's conference room. Although I rarely advise it, this may be an instance where withdrawing from retirement funds and paying the tax penalty may make sense.
There is no easy answer here. Unfortunately, you have found yourself in a situation with 2 hard yest valauable lessons:
- Cosigning a loan makes you as legally responsible for the debt as your ex-girlfriend
- In the future, ensure you value a car properly before buying it to ensure you will not be upside down on the car loan. This is called the "loan to value" ratio, and Credit Unions are really good about making sure that you don’t borrow more than the car is worth and find yourself in this situation
YOU (or your ex-girlfriend) must make sure that the balance is paid back!
If you do not, the lender will most likely "charge-off" the balance (which will gravely impact your credit score), you will still be responsible for the balance, and they will STILL expect and make efforts to recover that balance from you - they may even sell it to a collections agency which will rack up more fees and further ruin your credit.
2 possible solutions:
- Sell the car privately to maximize the profit, pay that money to the bank (reducing the balance owed), and pay the lower balance over time in amounts you can afford that stay within the loan term limits (yes, on a car that you no longer own)
- Convince the bank to take it back, they sell it, apply the money to your balance, and you continue making loan payments on the remaining balance - This is less desirable as the bank will most likely charge fees to collect/sell the vehicle that will increase the balance owed , and list a "negative" reporting status on your credit report (like a repossession)