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APR 28, 2013

Co-Signer Rights

What rights to the property does the co signer have?

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Bill's Answer: Answered by Betsalel Cohen

A lender will require a borrower to find a willing co-signer if it is worried about the borrower's ability to repay a loan. The co-signer takes responsibility for repaying the loan if the primary borrower does not. If the lender cannot collect from the borrower, the co-signer must repay the loan plus late fees, interest, or other charges the lender adds.

Loans are secured or unsecured. A secured loan is tied to the item purchased with the borrowed money, customarily. In the legal trade, the item in question is referred to as the security. Vehicle loans and property mortgages are common examples of secured loans. A credit card is a common example of an unsecured loan.

A vehicle or house may be purchased with borrowed money, but it is not the loan that gives the borrower or lender the right to possess the security. A title determines who has ownership rights to the vehicle or home.

For a vehicle purchased with a loan, the title will list the name of the lender. If the borrower defaults on the loan, the title (among other legal documents) will give the lender the right to repossess the vehicle. If a vehicle contains only the name of the primary borrower and the lender, then the co-signer (if any) has no rights to the vehicle. If the co-signer is listed on the vehicle's title, then he or she has the legal right to possess the vehicle.

For real property, the concept is the same as a vehicle loan, but details differ. However, the central point is the same — if the co-signer is listed on a real property's title, then he or she has some interest in that property. Rights to a property can be complex, and take half a semester to teach in law school, so it is beyond the scope of this answer to discuss an owner's possible rights to a property.

Your Question About Co-Signer Rights

You asked what rights a co-signer has to a security. The real question is, "Does the co-signer's name appear of the title?" If yes, then the co-signer has a right to the security. If the co-signer's name does not appear on the title, then the co-signer has no right to the security.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

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Comments (18)


Mark S.
Nacogdoches, TX  |  April 28, 2013
My grandmother cosigned for a truck that i've been pay on for the past year. the notes are current and up to date and we're both registered on it, but i'm the primary signer on the loan. we're having family issues and i have an opportunity to work out of state with family that she doesn't get along with. can she legally take the truck from me if i went to work out of state? because shes threatening to have me stopped if i cross the state line with it saying its "stolen."
Bills.com
April 28, 2013
I can't give you legal advice, as only an attorney can properly do so, but I will share a few thoughts with you.

I don't believe that stolen car charges would have merit for a person on title. However, the difficulty I think you will encounter is that your new state will most likely require you to register the car in that state and require both people currently on title to sign. Without your grandmother assenting, it doesn't appear you'll be able to register the car.

I recommend that you contact the Department of Motor Vehicles in the state to which you wish to move, to find out exactly what their rules require.
Mary S.
Pilot Mountain, NC  |  February 22, 2013
My 23 year old son is ready to buy a house. The banks says his credit is good, but since he has been on his current job less than 2 years, they want me to Co-Sign for 1 year. They have a standard co-sign form and added a line "this guanrantee agreement shall terminate on _______" (where we fill in the end date at closing. Will this work for relieving us of obligations after that date? Could they demand we pay the full loan amount during the year even if payments are made on time? Thanks for your help!
Bills.com
February 22, 2013
I can't comment on a contract I have not read. Take the form you mentioned to a lawyer in your state who has contracts or real property law experience. He or she will read the contract, and will advise you what rights and liabilities you and the lender have.
Shivan S.
Nashville, TN  |  April 23, 2012
I co-signed a loan with my GF with Sallie Mae, I'm the only one making payments on the loan, and yes we're still together. My question is, Does Sallie Mae has any legal rights to apply the payment toward her other accounts that I'm not the co-signer for? She has at least 1 or 2 other loans with Sallie Mae. Every month I make payments on time, and about several times a year, when I look up the sallie mae account it shows that I made a payments that does not match my bank statement. It's lower the actual amount. I have setup where the payment goes to the co-signer payment center and put on the payment (through the bank) for the amount to go toward the co-signer loan only, and this keeps happening.
Bills.com
April 24, 2012
The precise answer to your question depends on the contract between Sallie Mae, yourself and the main borrower. Only a lawyer who has reviewed the documentation could give you a legal opinion. I am not a lawyer, but common sense would dictate that payments you make as a co-borrower should be earmarked to the account that you are signing for, and any extra funds should be applied to that account. I recommend that you write the servicer a letter outlining the payments you made to the loan and the amounts credited to that account. Demand that any discrepancy be applied to the loan you co-signed for, and not another loan. In addition, speak to a supervisor or a complaint department, regarding your problem.
Shelby S.
Midland, TX  |  March 31, 2012
My daughter is facing a unique situation regarding a Car Title Loan in the state of Texas. The vehicle in question is titled to her boyfriend's aunt (not to her and not to her boyfriend). He went for a title loan and asked for the loan to be in both his name and my daughter's name - the car title loan store agreed and granted a $1000 loan on the car to him with her as the "co-signer". They broke up before the loan was due, and now she is being harassed by the loan store because he 1. has possession of the car, 2. the loan store did not obtain the actual title from him but took a copy of the title instead, 3. he has defaulted. A. Can a car title loan store LEGALLY put her name on the loan to begin with (they were not married, and the title does not have her name on it)? B. What would be the purpose of having a co-signer to begin with - considering these places do not loan based on credit but rather on collateral. C. Can the title loan store LEGALLY pursue collections against my daughter? D. What recourse is there for my daughter?
Bills.com
April 01, 2012
On the face of it, if your daughter signed a loan document as a co-borrower, then she is legally responsible for the payment of the loan, and can be sued for non-payment. The lender may ask for additional guarantees, which the borrower may or may not agree to. Since I am not a lawyer, I cannot give legal advice. I recommend that you speak with a lawyer, who can review the loan documents and give your a legal opinion.
Andy B.
Groveport, OH  |  March 13, 2012
Thank you for this article! What about in the case of everyday items without titles purchased on a credit card? Let's say a couple applies jointly for a credit card, then separate, then the ex-husband charges $1000 buying everyday items at target and doesn't pay the bills. If the ex-wife pays off the debts, is she entitled to the items from Target? Thanks!
Bills.com
March 13, 2012
It is prudent to close any joint accounts upon separation. I recommend that you speak with your divorce lawyer regarding the division of property.
Shelly T.
Clinton, IL  |  February 29, 2012
We got a loan from the bank for a car that cost 6,000.00 in 2007. Since it was a used car the bank wouldnt loan us the entire amount so we had to get a cosigner for 1,200.00 of it. We nearly paid the entire thing off then my husband was laid off and we couldnt make another pmt. My mother n law paid the remainder off because she didnt want there to be a late pmt on her credit. The remainder was 1,100.00. Once the car was paid the bank held the title until they had proof we paid her back for the portion she paid. That was 3 yrs ago. She is nowhere on our title, just a cosigner. We have since paid her back and have fought with her and the bank to get our title so we can sell the car. It is no longer running. She is a controlling person and doesnt feel we need to get another car and pmts, it will be without her cosigning. She is good friends with the bank president and has a large sum of money in their bank. My question is, can the bank put a hold the title like they did and why do we have to wait for her to sign a release to send us the title. She is finally doing so now but I would really like to know how they have had complete control over the title when we paid the lender and cosigner back over 2 yrs ago and they are just now going to release it to us after cosigner signs release.
Bills.com
February 29, 2012
The facts you shared do not add up for me, either. If the loan is paid in full, the lender is required to release the title for the loan's security to the owner. What reason or reasons does the bank offer for not releasing the title? "Your mother-in-law told us not to give you the title," is not a valid reason based on the rules of either finance or law.
Kim M.
Hermosa Beach, CA  |  January 16, 2012
Hi, I am about to get married. I am a simple girl with a normal savings account and have no debt in any form. My fiance is financially stronger then I am and he owns several pieces of real estate including commercial real estate (apartments). If we draw up a prenuptial agreement stating that we keep everything acquired before marriage separate, can I be responsible for paying of his mortgages when he fails to do so? What happens to property that he buys or gets a loan for while we are married? Both my fiance and myself agree that I shouldn't be liable for his debt in mortgage loans before or after marriage. We will reside in Southern California. Can my fiance get a loan or buy a property without me signing anything? And does my not signing a loan contract or mortgage directly mean that i cannot be liable for paying of his mortgages/debt from property??
Bills.com
January 18, 2012
You should have your own lawyer, who represents your interests, review any prenuptial agreement before you sign it. Regardless of how much you trust your fiance, it is important to make sure that you are being treated fairly.

California is a community property state and community property law is complicated. Your excellent questions are best answered by an attorney.
Katina D.
Marrero, LA  |  November 17, 2011
When i purchased my home I use the income of my children as signer and co- signer but i paid the mortgage. The signer come get my money to pay the mortgage but i just receive information that we must vacate the property. What right does the co-signer have and can i take over the mortgage if he's in process of losing the house?
Bills.com
November 18, 2011
I don't fully understand your question. If you have been giving money to someone who was historically taking that money to pay the mortgage and stopped doing so, placing the home at risk, then you should speak with a lawyer ASAP. He or she will advise you about your options and whether you can take action against the person you refer to as the 'signer.'
Edwin C.
Lawrence, MA  |  August 29, 2011
In Massachusetts is a creditor allowed to place a lien on a co-signers home due to a defaulted private student loan, even though both the signer and co-signer have been laid off and are collecting unemployment? The cosigner has children and the home he/she owns is a joint mortgage with another sibling.
Bills.com
August 31, 2011
A co-signer is fully responsible for the debt. A defaulted debt for which the co-signer signed can lead to a lien on a home or other collection efforts, such as a bank levy or wage garnishment.
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