Reader: My wife co-signed a loan on a 2007 car for her sister. Now, it’s being repossessed, and $23,000 is still owed on it at 20 percent. What can we do in this situation?
Dave: Tell the bank or dealer where the car is, and tell them to come pick it up. There’s no way to get out of the rest, my friend. You and your wife are going to be liable for whatever the car doesn’t bring in afterward. Let’s say it sells for $4,000. That would be subtracted from what is owed, and it will still be up to you guys to pay the rest. You could always try to negotiate to settle it for pennies on the dollar. Based on what you’ve told me, that’s a best-case scenario.
The other thing I would do is demand a full audit on the account because a 20 percent interest rate doesn’t explain why a car didn’t pay off — especially a $23,000 car. If this was a $5,000 car from a tote-the-note car lot, and they were ripping her off charging only interest — and that’s all anyone was paying, and she gave up and punted — that’s fine. You’re just looking for a little understanding of the situation. But $23,000 cars don’t generally have 20 percent interest. That’s a pretty freaky deal, and I’d want to know where the money went.
From a bank’s perspective, I don’t see how anyone would think something like this would work out. The car was going down in value the entire time, so it just doesn’t make sense to me. Of course, if you have the cash lying around and it wouldn’t damage your finances, you could just take care of things and call it Stupid Tax.
Co-signing on a loan, especially with family, is never a good idea.
