In Many Cases, The Co- Signer Of A Loan Is A Member Of The Borrower S Family

Category: Finance.

In order to be approved for credit, about 10% of borrowers in Canada need to give the lending company( usually a bank) assurance in the form of a co- signer. In many cases, the co- signer of a loan is a member of the borrower s family.

A co- signer is someone who has a good and established credit rating already, and who agrees to assume the debt in the event that the person in whose name the money is lent is unable to pay. Most other people will not assume the risk, although it could be a close personal friend with a good credit record. In this scenario, we will use the example of a car in order to see how the situation will play out. In some cases, there is a risk that a co- signer may die before the loan is fully paid back, in which case the borrower may wonder what will happen to the assets purchased with the loan. First of all, it is very important to note one thing. They are simply a guarantee to the lending company that someone will be able to pay for the car. The co- signer of your loan does not, own the car, in fact that you needed to obtain the loan to buy.

Ownership will only revert to them if you have defaulted on the loan on your own, and they have had to make the payments themselves. In this case, you car will be part of the co- signer s estate, but otherwise it is your own property. In this case, the paper work will already have been changed to reflect the co- signer as the owner. Of course, the death of the co- signer does lead to other issues, even though the car will still be yours. Now, the odds are that if you are a responsible enough person to do this in the first place, you have been sure to make your payments. Probably most significantly, you may have to report to the lending company that you no longer have a co- signer to cover you in case of default.

In that case you should have no problems. Remember that the reason you had to have a co- signer in the first place was due to bad or no credit( probably no credit record) . Here s why. Once you have been making payments on a loan, you have established, however a credit record. Of course, most people will probably not even think of informing the lending company should a co- signer die. Lending companies now have a basis on which to approve you for a loan, so you will probably be able to secure the loan without the need of a co- signer.

As long as you continue to make your payments, this will not be an issue. If you do default, and the co, though- signer is responsible, your car will become part of the estate.

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