When your co-applicant doesn’t pay, what do you do? Our co-applicants are usually people whom we hold dear and as well trust. We normally co-sign for them because we are to an extent certain that they will pay. The person in question is to make all the payments on time and abide by the agreement.
When they miss payments or do not pay at all, we feel confused about what to do. Knowing what happens when a co-applicant does not pay will help you decide whether or not to be another person’s co-applicant.
When your Co-applicant Doesn’t Pay: How Does This Affect You?
Co-signing a loan is not just lending a friend or relative to your positive credit history to enable him to get a loan. It further involves taking responsibility if he does not live up to expectations. This means that if he fails to make payments, you will pay them and his actions can as well increase or lower your credit score.
When your Co-applicant Doesn’t Pay: Your Credit Report
Whatever happens such as repossession, foreclosure, and eviction from nonpayment on the loan directly affects you. It will enter your credit report. Until the time limit of the credit reporting. This can cause you a denial of auto or mortgage loans.
The Debt Collector
Moreover, in case the account goes into collections, the debt collector will add you to any collection activity. He can as well call you and list the account on your credit report. If the co-signer files bankruptcy, you go in for the debt.
Furthermore, the lender or an assigned debt collector can sue you for any unpaid part of the debt, even if they don’t sue the person you cosigned for. In a situation that the lender wins the lawsuit, a judgment will be entered against you. The peak of it is that if you can’t satisfy the judgment fully, the creditor can file to have your wages garnished until you pay the debt completely.
What To Do If The Cosigner Stops Paying
You have very slim chances. If your co-signer stops paying, continue the payment. This will safeguard your credit score and protect you from a lawsuit. Continue this process until he starts the payment.
Moreover, if the loan is auto or mortgage, you can sell it and pay off the debt. Any balance left unpaid will still be paid by you.
Refinancing and Consolidating
Based on your cosigner’s credit history, he can refinance or consolidate the loan in his name only. You need to tactically convince him to do this. so that it’s in their name only. He may have fewer chances here due to late payments. You can refinance or consolidate the loan yourself if that will result in a lower, more affordable monthly payment. This may be very hard for you too to decide.
Worse To Worst, Declare Bankruptcy
When you have tried all other means to no avail, file bankruptcy. This will give you some peace of mind. Do not worry, after some years, the bankruptcy status will be deleted from your report.