Co-Sign a Loan? Never, Ever

Dear Mary: About ten years ago my daughter co-signed on an automobile loan for a friend. The “friend” skipped out on payments and left town, so they came after my daughter for payment. All these years later, she still has not paid anything on the loan. Is there a time limit for how long they can come after her to pay? Is there anything that she can do to get out from under this problem? Thanks. Jeanie H., North Carolina

Past and Image

Dear Jeanie: I am not an attorney, so I cannot offer any kind of legal advice. That being said, my understanding is that in North Carolina a debt that is secured by a promissory note (like a car loan) does not have a statute of limitations (SOL) per se. Once the lender files suit and receives a judgment against the borrower (your daughter) for non-payment, the lender has ten years from that date to try and collect. Then the debt can be reported to the credit bureaus for up to seven years after it is “written off” as uncollectible, which is only slightly better than “bankruptcy” on the list of bad things on her credit report.

Your daughter should go to to order all three of her credit reports, one each from Experian, EquiFax and TransUnion. She is entitled to one free report from each bureau, every 12 months. If a judgment has been filed against her, the reports will show those details including a date the judgment was filed.

This is a terrible tragedy and I am so sorry that she has gone through this ordeal.

Now, even though you didn’t ask, I’m going to give you, your daughter and everyone reading this my standard lecture on co-signing for a loan. Do not do it. Never, ever and I mean under any circumstance.

If anyone (child, parent, brother, sister, cousin, aunt, uncle, employer, employee, friend or foe) cannot secure a loan on his or her own, that means the bank sees this person as too risky. So why on earth would you, a non-professional person with limited resources, step up and agree to take on a level of risk that even a big bank would not? You shouldn’t. Never, ever, which I believe I just said, but I need to keep saying it.

Whenever you co-sign on a loan by adding your signature to the promissory note, you are entering into a legal contract promising the lender that if the borrower defaults, you will gladly pay the loan on his or her behalf—no matter how much it is or how long it takes.

If you really want to help and you believe in this person’s ability to repay a loan, wonderful. Do it. But instead of co-signing on a loan, you become the lender. You heard me. Just hand it over now and save yourself all that hassle later. What? You can’t afford to do that? Then you cannot afford to co-sign either.

So are we clear on this? Never, ever co-sign for a loan. Hear?

More from Mary's Everyday Cheapskate

A plate of food and a cup of coffee
kitchen island wood floor beautiful kitchen
cleaning bathroom sink
fearful woman looking out window
Afro woman repairing furniture at home.
A person flying through the air on a snow covered mountain
2020 washing away in the surf
black and white cat lying in yard garden
Print Friendly, PDF & Email
20 replies
« Older Comments
  1. Mary Wilson says:

    Yes I did. I was married. My ex husband quit making the payments 6 months after the divorce. I got the car but it was so abused. I spent money getting it fixed, new tires, etc. For six months, I paid my car payment and his. I couldn’t do it anymore. I gave it back. The divorce decree says the car is his responsibility. We will see how well the divorce decree holds up when they come after me for the payments. Selling it was attempted but because of its condition, I couldn’t get what was needed and the bank wouldn’t write a personal loan. I was just out of options.

  2. Carol Woodley Russell says:

    my post seems to have disappeared so I’ll try again.
    We did co-sign for a auto loan for our youngest daughter. Not only did she pay it off, but did it before the expiration date of the loan. We are proud of her for being responsible.

  3. Maxilyn says:

    My daughter is on disability due to two strokes and two brain surgeries in her mid-twenties. My co-signing the loan was the only way she could get a car. She has never been late with a payment. In fact, her credit rating is higher than mine.

  4. Errin says:

    3 years ago I co-signed for my son who was 18 at the time. Because he had no credit history, having paid cash for everything, the bank wouldn’t accept his having a savings account there (with more money in it than the amount borrowed), he owned his own truck and the fact that he had a steady job towards his ability to repay. He had no trouble repaying the loan, even paying it off early at my suggestion. Even with our excellent history at the bank they would not give him a loan. How can a young adult establish credit without making and repaying small loans? No way would we give him a credit card, cash rules at our house.

  5. gagirl says:

    I did co-sign for my daughter to buy a car years ago. Thank goodness she was responsible, she paid it off, that was 12 years ago and she still drives that car today. She also went on to buy her own home at 21. But I also made the mistake of helping a cousin get a cell phone, she stopped paying the bills, they not only turned her phone off but mine too. That took a long time to get that straightened out. So I have a good and bad story. In my daughters case she was young and had no credit, so that’s why I signed for her, but I was just stupid when it came to the cousin, she was plenty old enough to have credit, unfortunately it was all bad.

« Older Comments

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *