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Q: I made the big mistake of co-signing for a friend on a car loan. After six months, she stopped making the $353 payment. The car is financed through a dealership that is getting ready to pursue repossession. The dealership advised it would put the title in my name only if I was able to refinance the car. The balance is $17,720, and I don't have the credit or money to do this. What are my options? I have tried to reach this person, and she refuses my calls and won't call me back.
A: Some lessons in life are harder to learn than others, and I'm afraid you find yourself on the wrong end of one of the hardest. Let me just say this: If asked to co-sign for anyone -- a friend, a child, even your mother -- the best answer is "no" unless you are currently prepared to take on the debt for yourself.
That said, let's talk about your options, which I'm afraid are fairly limited.
She won't call you back? Get in your car, while you still own one, and go present yourself at her doorstep or visit her at work. If she is any kind of a friend, and she must have been for you to co-sign for $17,000, then she is probably very embarrassed about her failure to make the payments and doesn't know what to say. You may have to initiate the contact if you want to save the friendship.
Try to work out some sort of repayment schedule you both can live with. If that fails, you could do what the dealer obviously wants you to do, which is to refinance the vehicle and take it for yourself.
I assume you already have a vehicle of your own, and you say you do not have the money or the credit to do this. Still, you might consider selling your current vehicle -- if you own it -- and using the money from the sale to help in the refinancing. I know this is not what you want to do, but it is an option that could be considered if you can afford it.
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Another idea might be to see if you know anyone in the market for a vehicle who might be willing and able to purchase the car. Of course, the dealer would have to be willing to go along with this plan. I don't see that as a major stumbling block. However, if the car is upside down in the loan (that is, the amount owed is more than the car is worth), that will require some upfront money from you to make the sale work.
You need to be prepared for the consequences if the car is repossessed. The dealer will likely sell the car at an auction, and if it goes at a loss, you as the co-signer will be equally liable for the balance due. That's right -- even after taking the car, the dealer has the legal right to demand the difference, plus repossession and legal fees, from you. And it is quite likely the car will be sold for less than is owed.
At that point, you may want to take your friend to small-claims court if the difference falls within its monetary limitations for suit. With the proper documentation, you would have a good case, but getting the money from the judgment is another story. Meanwhile, you are still stuck with an amount due the dealer and all of the consequences of a trashed credit report and credit score for the repossession. If it's any consolation, the same is true of your former friend. Her credit will be tarnished, she will still owe the dealer and she will have a judgment against her from you.
How's your credit?This can get worse, I'm sorry to say. I once counseled a jilted guy who came to see me in a similar situation. He had co-signed for his sweetie, and she took the car and left town. He had to pay for the car in full, as it couldn't be repossessed at all!
Talk to your friend if you can. That's the best way out of this sad tale, I'm afraid.
Good luck!
This article was reported and written by Steve Bucci for Bankrate.com.
Published May 2, 2007
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