I'm the Co-Signer on an Auto Loan and I Want to Get Lower Payments

by Steve Rhode


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Question:

Dear Steve,
My daughter bought a car that she has now defaulted on (one year). Initially, I was to be the co-signer. She didn't make enough money to be the buyer, so they made me the buyer and her the co-signer. The finance company is asking for 60% of the loan amount, which I am unable to do.

Where can I find a letter that asks to pay the back interest as soon as possible and places the back principle at the end of the contact on an auto loan?
Ltonia

Answer:

Dear Ltonia,
It's not clear from your question if your daughter's car was repossessed or she is just trying to work out a repayment plan. If the car was not repossessed and she is still in possession of the car, then she can always negotiate a modified repayment plan as you described.

Keep in mind that there is no obligation for the lender to accept or agree to any such plan. All payment modifications must be approved by the lender. The only obligated payment they must accept is the payment originally agreed to in the financing contract.

Of course, once the borrower defaults, the balance can grow significantly due to collection fees, accrued interest, and maybe a higher penalty interest rate.

As the co-signer, you are 100% responsible for the loan, so if the loan is in default, the finance company can certainly demand that you bring the loan current. After all, that's what you agreed to do when you opted to be the co-signer. This is why I always advise people to never co-sign a loan.

As the co-signer, you also don't have any standing to call the finance company or negotiate any of the terms on the loan. Only the borrower has that right, unless they have given you authority to act on their behalf with a power of attorney recorded with the lender.

Having trouble affording your auto payment? See if refinancing into a lower rate is an option.

Therefore, the bottom line here is you should get your daughter in the same room with you, call the lender, and attempt to work out a repayment arrangement as you described. Just be prepared in case they say no.
Steve Rhode
Get Out of Debt Guy - Twitter, G+, Facebook

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This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.


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