Q: Im Considering Cosigning a Car Loan For My Child. Is This Risky?

JAN 14, 2011

 

A: It certainly can be. As co-signer you are agreeing to be responsible for the loan if your child fails to make the payments.

The loan will show up on both parties credit reports and could affect your report and score negatively (as well as your childs) if he or she defaults.

It is usually hard for a child to get a loan without a co-signer due to their limited credit history. First consider the option of buying a used car without a loan. If you decide to co-sign, check with your child each month to be sure the payment has been made. If payments are missed, the car could be repossessed. Repossession stays on both credit reports for up to seven years and will cause damage to your credit score, potentially impacting your finances.