I co-signed a car loan with my daughter, who refuses to make the payments. Can I force the bank to repossess the car?
Three months ago, I co-signed a loan for my daughter to buy a car. She is now refusing to make the payment. Is there any way the bank can take the car and try to sell it or is this not an option? I cannot afford to make the payments for her.
When a lender does not want to do business with a borrower, the lender will require the borrower to find a co-signer on the loan. The co-signer acts as a guarantor, which means that if the primary borrower does not repay the loan the co-signer will.
Here, you co-signed on the loan because the lender had questions about your daughter's creditworthiness. Unfortunately, their reservations were well placed, and you as a co-signer are responsible for making the payments. The question is, what, if anything, can you do about it?
A key fact missing in your question is how your names are listed on the vehicle's title, or if your name is on the title at all. This is significant. When a person's name is on a vehicle's title, that means he or she has the authority and right to possess the vehicle and, if they are so inclined, sell it or give it away.
You have no right to possess or sell the vehicle if your daughter's name alone is on the title. Conversely, if the title contains your name only, then you have the right to take possession of the vehicle and sell it. The issue gets muddy in situations where both names are on the title. If the vehicle was registered with an "and" between your name and your daughter's name, then it is owned by both of you, and you both need to sign the title (commonly called the pink slip) to complete a sale. If the vehicle is registered with an "or" between the names then either of you have the authority to possess and sell the vehicle.
A caution: If the ownership issue is unclear, take all of the documentation you have relating to the loan and the auto purchase to an attorney in your area
Let us talk about repossession. When a vehicle is repossessed, the lender usually sells the car at auction and applies the sales price to the balance you owed on the loan. As a general rule, the borrower is responsible for any amount of the loan not covered by the auction proceeds. Generally speaking, repossessed vehicles sold at auction sell for significantly less than the cars are actually worth, which can leave a borrower owing thousands of dollars for a vehicle the borrower no longer even owns. This means you may still owe a significant amount of money to the lender even though you or your daughter no longer have the vehicle.
For this reason alone you should avoid allowing the vehicle to go into voluntary repossession if possible to minimize the amount the deficiency balance on the loan. There is another reason as well: A repossession will appear on both of your credit reports. Repossession is a derogatory mark, which will impact your credit score a large amount. How much of an impact this has will depend on your present score. If you have a high score, it will cause a great deal of damage. If you score is already damaged from other misfortunes then a foreclosure will have less of an impact.
Where does this leave you? As discussed, both you and your daughter are responsible for repaying the loan. You may have an agreement with your daughter that she will make the payments. If so, and if you start to make the payments, you can sue her to recover what you pay. Not many parents sue their children, but there's nothing preventing you from doing so in this situation.
To learn more about auto loans and repossession, I encourage you to visit the Bills.com Auto Loans page.
I hope this information helps you Find. Learn & Save.
Did you know?
If you are struggling with debt, you are not alone. According to the NY Federal Reserve total household debt as of Quarter Q4 2023 was $17.503 trillion. Student loan debt was $1.601 trillion and credit card debt was $1.129 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 10% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
Collection and delinquency rates vary by state. For example, in Vermont, 16% have student loan debt. Of those holding student loan debt, 5% are in default. Auto/retail loan delinquency rate is 2%.
While many households can comfortably pay off their debt, it is clear that many people are struggling with debt. Make sure that you analyze your situation and find the best debt payoff solutions to match your situation.