Dear Lawyer Lion:

My cousin asked me to cosign for a car he wants to buy. I want to help him but I’m not sure what “cosigning” actually means?

—Confused Cousin

Dear Confused Cousin:

This is an excellent question, that unfortunately not enough people ask before they cosign for a relative or friend. 

A lot of people assume that a cosigner is like being a character reference, but this assumption is untrue. A cosigner is a third party who guarantees that the person for whom they are cosigning will repay the debt on-time and in-full. A cosigner is contractually obligated to repay the debt if the person they cosigned for fails to pay. As a cosigner, you are as responsible for the debt as the person for whom you cosigned.

In your situation, if you cosign for your cousin, you are promising that you will be responsible for any payments that your cousin does not make. This means if your cousin misses a payment, you may have to make that payment . And any missed payments can affect your credit score!

In a worst-case scenario situation, if the car is repossessed for lack of payments or failure to have appropriate insurance, you can be sued for any outstanding balance on the car, and a judgment will be entered against you.  Your wages can be garnished, your bank account emptied and your credit score tanked – causing your other credit cards to increase interest rates or lower your available limit. 

So, before you co-sign for your cousin you need to think about the following questions:

  1. Do I trust that he will make the payments on time until the loan is paid off?
  2. Will I be able to make payments on this car if he can’t?
  3. Do I want to be responsible for any outstanding balance if the car is repossessed?
  4. Can I handle a “ding” on my credit report if he doesn’t make the payments?
  5. Do I want to be a Defendant in a lawsuit if he defaults on the loan?

If the answer to any of these questions are “No”, you SHOULD NOT cosign for his car note. It may be an awkward conversation to have now, but your relationship will be much worse with your cousin if you end up paying off a car that you didn’t even own!

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