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Co-Signing on An Auto Loan

Co-signing an auto loan might seem the right thing at the time when your friend or a family member is a little short on the credit. You might be very optimistic and affectionate at that time but soon after signing on that paper you will realize that it was not a good thing after all. You wonder why? Well read on to learn about the disadvantages of co-signing auto loans.

Co-signing auto loans make you legally responsible for paying off the loan in case the other co-signer defaults. You might have to pay off the total debt amount as well as any late fees and other collection costs.

Moreover, after co-signing an auto loan, if you apply for a loan for yourself, then your co-signed loan will be considered as your financial obligation, which will limit your chances of getting a loan for yourself.

Furthermore, if the auto loan which you co-signed end up in default then you will end up in lots of debt, and if you don’t the resources to pay off, things will get worse.

So it is better not to co-sign auto loans as they negatively affect your credit report. Moreover, as the car is not in your possession so you do not have any control over its maintenance, and you also do not know whether the payments are being made regularly or not.

However, if you have to co-sign auto loans then it is better to arrange for a side contract regarding the repayment terms and the fiduciary responsibility of the loan. In this way, you will have a safe side.

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