Cosigning is the act of signing a document, usually a contract, along with another person. The effect is both individuals are responsible under the terms of the document.
Why Do I Have to Cosign for a Car?
Cosigning for a car occurs for two general reasons:
- The other signer is a minor: because minors cannot contract, car companies will generally make you cosign for a minor's car.
- The other signer has bad credit: by cosigning, you are supplying the necessary credit to the car company.
What are the Consequences of Cosigning for a Car?
If you cosign, you could face some or all of the following:
- If the other person defaults on any payments, in some states, any creditors can either come directly after you for that money. In other states, those creditors can still come after you for the money, but only after the other person cannot pay, or the car can be repossessed.
- You can be made to pay any fees associated with credit issues,
- The actions of the other person can ruin your credit score,
- Effect your estate and gift tax exemptions, or
- Effect your insurance liability because as cosigner, you are responsible for the acts of the other party while driving the car.
Do I Need an Attorney if I am Cosigning for a Car?
It is always recommended that you consult with an attorney before signing any legal document. This rule applies to consigning a car, since any documents you sign are valid contracts, and an attorney can help explain the consequences before it is too late.