Buying a new car can be expensive and many are purchased with financing plans, which require a down payment and monthly future payments. In some cases, according to CarBuyingTips.com, buyers with bad credit receive less favorable financing plans, higher interest rates and may need the assistance of a cosigner. A cosigner is someone who signs the contract with the buyer and commits to making payments should the buyer default. Because of the risks involved in cosigning (credit and financial loss), it is imperative to know your rights.
Ownership Rights
In spite of the fact that a cosigner may have to make payments or have adverse credit repercussions because of the primary signer's inability to make timely payments, a cosigner does not have ownership rights. If a cosigner continues the payments, there are never ownership rights to the vehicle. Conversely, if the vehicle is paid off by the primary signer, the cosigner has no further obligation as it relates to the vehicle.
Refinancing
Cosigners who find themselves in the precarious position of making payments, late payments or having their credit affected, may ask the lender to refinance the deal under the signer's name. This may prove effective if the signer's payment history is good. However, many lenders don't favor this option. Because cosigners have no rights to ownership, they cannot refinance auto deals under their own name.
Risks
Cosigning for an auto loan, and many other loans, is the act of signing over credit to another individual. The risks include not only the potential for a bad credit report, but also financial loss because a cosigner may need to make payments that are late or missed. FirstCarGuide.com explains that cosigning may impact the ability of the cosigner to be approved for other loans because the auto loan will be calculated as debt against income.
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