What does co-signing really mean? (lease, insurance, credit, buy)

[HappyRider]

What happens when you co-sign for someone? I understand that the loan shows up on your credit report and you are responsible for payments. My question is does the loan improve the credit score of the actual owner? After all, they really don’t know who is making the payments. Is the co-signer on the title? I know it is on the registration. What does financing have to do with car registration?

[LeagleEagleDFW]

A co-signer is a registered owner of the car and is guaranteeing the note in case the other person defaults. Since the co-signer is an owner, they go on all the paperwork.

[UpstateJohn]

I "co-signed" on my wifes van. She wanted to improve her credit. My name was listed as a co-signer, not the actual owner, on the paperwork, but not the BOS. The registration was in her name, and the title came in her name when it was paid off. That was a few years ago. My co-worker basically did the same thing for his wife a couple of weeks ago, but the registration came with her name first, and OR, his name second.

[HappyRider]

What are the implications of having both names on the registration? Why is that necessary?

[UpstateJohn]

Originally Posted by HappyRider

What are the implications of having both names on the registration? Why is that necessary?

Here, its like both people purchased the car. Nothing unusual about it. Most of the time though, it will have AND instead of OR, if both parties purchased the car "together", so its like OUR car, not just your car or my car.

[irman]

Originally Posted by LeagleEagleDFW

A co-signer is a registered owner of the car and is guaranteeing the note in case the other person defaults. Since the co-signer is an owner, they go on all the paperwork.

Not necessarily ...
It depends in the end how the loan was set up during the process.

In the end the co-signer is responsible for the loan,
in case of late payments or default of the loan.
During default, the car is the collateral and will thus be used
to repay the loan and the rest of the debt is the responsibility of the co-signer.
The car could be registered in the Buyers name only.

Case in point.
If a very young person wants to buy or lease a car,
even if that person has a very good job and could make the payments very easily,
some institutions do not make a contract with a very young person.
Then, the contract is made by the co-signer and the young persons name in also on the registration.

When an older person with a low or no credit rating needs a car,
a co-signer can help with the loan, and as pointed out above,
the name of the co-signer may or may not be on the registration.

Been there, done that in both examples above.
My daughter was 17 at the time of her first car lease.
I signed for the lease contract, and her name was added to the registration besides the leasing entity.
She made all the payments, but sadly never got credit for those payments.
I assume because her name was never *on* the lease contract.
During her lease time, she bought a lot of stuff and paid it off in at the maximum of a year,
just to create credit history.

A good friend needed their first car after immigrating to the USA.
He worked for me so it was easy to determine (for me) to co-sign or not.
The bank contract had my name on it, besides his, but the car registration
only had his name and the banks name on it as the lien holder.
His loan contract is on *my* credit report (reported as *paid off*).

Personally, co-signing is a risky business that really does nothing for the co-signer,
except for the satisfaction you may get for helping another person.

I co-signed for all the first loan contracts of our children.

[jtvaj125]

Originally Posted by irman

Not necessarily ...
It depends in the end how the loan was set up during the process.

In the end the co-signer is responsible for the loan,
in case of late payments or default of the loan.
During default, the car is the collateral and will thus be used
to repay the loan and the rest of the debt is the responsibility of the co-signer.
The car could be registered in the Buyers name only.

Case in point.
If a very young person wants to buy or lease a car,
even if that person has a very good job and could make the payments very easily,
some institutions do not make a contract with a very young person.
Then, the contract is made by the co-signer and the young persons name in also on the registration.

When an older person with a low or no credit rating needs a car,
a co-signer can help with the loan, and as pointed out above,
the name of the co-signer may or may not be on the registration.

Been there, done that in both examples above.
My daughter was 17 at the time of her first car lease.
I signed for the lease contract, and her name was added to the registration besides the leasing entity.
She made all the payments, but sadly never got credit for those payments.
I assume because her name was never *on* the lease contract.
During her lease time, she bought a lot of stuff and paid it off in at the maximum of a year,
just to create credit history.

A good friend needed their first car after immigrating to the USA.
He worked for me so it was easy to determine (for me) to co-sign or not.
The bank contract had my name on it, besides his, but the car registration
only had his name and the banks name on it as the lien holder.
His loan contract is on *my* credit report (reported as *paid off*).

Personally, co-signing is a risky business that really does nothing for the co-signer,
except for the satisfaction you may get for helping another person.

I co-signed for all the first loan contracts of our children.

Yep, depends on the loan. When my brother co-signed for me his name only shows up on the promissory note filed with the lender. My registration shows a lien is held by the lender.

Some lenders will let you remove the cosigner off the loan before it's fully repaid if you've shown good faith after a number of years. This will get the cosigner off the hook going forward and have it removed/changed on their credit report.

[HappyRider]

Originally Posted by irman

I co-signed for all the first loan contracts of our children.

Same situation here. So you are saying it is not automatic that he will get the credit for paying off the loan. I haven’t looked at the paperwork. We did mention that was the intent when signing up for the lease. Would checking his credit file answer the question? If the loan is listed then it will help his credit I assume. What about insurance? Do they care about the co-signer or do they even know? Insurance is in his name.

[Vannort54]

Originally Posted by jtvaj125

Yep, depends on the loan. When my brother co-signed for me his name only shows up on the promissory note filed with the lender. My registration shows a lien is held by the lender.

Some lenders will let you remove the cosigner off the loan before it's fully repaid if you've shown good faith after a number of years. This will get the cosigner off the hook going forward and have it removed/changed on their credit report.

Your name is the only name on the registration the cosigner is between the bank or other lender only. You are saying that if the person you co-signed for defaults on the loan you are responsible for the amount owned on the car. That's it the cosigner name is only on the loan payments no were else.

[Billy_J]

Most people I know who have co-signed for someone else wind up having their credit wrecked!

That is because the person who needs a co-signer is irresponsible to begin with (thus WHY they need a co-signer), and they later keep up their irresponsible trend... Make late payments or stop making payments. Then the lender goes after the person who co-signed.