Question:
Dear Steve,
My daughter bought a car that she has now defaulted on [1 year]. Initially I was to be the co-signer she didn’t make enough money to be the buyer so they made me the buyer and her the co-signer. The finance company is asking for 60% of the loan amount which I am unable to do.
Where can I find a letter asking to pay the back interest asap and placing the back principle at the end of he contact on an auto loan.
Ltonia
Answer:
Dear Ltonia,
It’s not clear from your question if your daughter’s care was repossessed or she is just trying to workout a repayment plan. If the car was not repossessed and she is still in possession of the car then she can always negotiate a modified repayment plan as you described.
Keep in mind, there is no obligation for the lender to accept or agree to any such plan. All payment modifications must be approved by the lender. The only obligated payment they must accept is the payment originally agreed to in the financing contract.
Of course once the borrower defaults the balance can grow significantly due to collection fees, accrued interest, and maybe a higher penalty interest rate.
As the cosigner you are 100% responsible for the loan. So if the loan is in default the finance company can certainly demand that you bring the loan current. After all, that’s what you agreed to do when you opted to be the cosigner. This is why I always advise people to never, ever cosign.
As the cosigner you also don’t have any standing to call the finance company or negotiate any of the terms on the loan. Only the borrower has that right unless they have given you authority to act on their behalf with a power of attorney recorded with the lender.
So the bottom line here is you should get your daughter in the same room with you, call the lender, and attempt to workout a repayment arrangement as you described. But just be prepared in case they say no.
Steve Rhode
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This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.