Cosigner Rights for Car Loans

Lenders may require cosigners for primary borrowers who have minimal credit history, or if the borrower has negative credit history. A cosigner on a loan to buy a car is assuming a financial risk that the lender is not willing to take for the primary borrower. Cosigners, however, do have rights that come with their financial committments.

Responsibilities

A cosigner is agreeing to certain financial responsibilities regarding the loan. If the borrower defaults, the cosigner must pay the debt. In fact, lenders may request payment from the cosigner at any time, even if the primary borrower hasn't technically defaulted, says the website Lawyers.com. For example, if the primary borrower misses a payment, the lender can go directly to the cosigner for the money without even attempting to collect from the primary borrower first.

Ownership

Depending on the loan agreement, cosigners often have partial ownership of the vehicle. If the registration or title list the cosigner and the primary borrower with "an" or "or" separating their names, the cosigner has partial ownership of the vehicle, according to Bankrate. If you need access to the title or registration, contact the lender.

Repayment

Before cosigning for a car loan, cosigners have the right to draw up a contract designating the primary borrower's obligations of repayment to the cosigner if the primary defaults on the loan. If the cosigner ends up having to pay a portion of the car loan, they have the right to draw up a promissory note with a scheduled repayment plan for borrower.

Negotiation

Cosigners can negotiate the terms of the loan. They have the right to request limited liability in relation to late charges and attorney fees. For example, the cosigner can ask the lender to draw up papers stating responsibility for the principal loan amount only. Also, upon request, the lender should alert the cosigner in writing of any missed payments from the primary borrower.

Consideration

Before cosigning for a car loan, a cosigner should take a couple of things into consideration. The possibility of payment responsibility is very real for a cosigner. Make sure you can afford the car payment if the primary borrower cannot. Also, cosigned loans appear on credit reports as financial obligations, so this could affect the cosigner's ability to obtain a loan for himself, says the website Consumer Bad Credit Guide.