What to Do if You Default on a Cosigned Auto Loan

If you manage to persuade somebody to cosign a car loan with you, the cosigner is equally responsible for its repayment. If you mess up and get behind with your payments, the cosigner's credit score will suffer. It's in your best interest to fix the situation as soon as possible to limit potential damage to your credit scores and your relationship.


Get in touch with your cosigner to let her know you've defaulted on your loan. In the interest of the friendship, you want him to hear it from you before he hears it from the lender.


If you can't afford to bring your account into order, look at refinancing options. You may, however, be able to refinance with a company that specializes in lending to people with credit problems. Your cosigner probably won't want to back you again, so you'll have to do this on your own. This could be expensive, but you'll no longer jeopardize the credit of a cosigner.

Payment Plan

Negotiate a repayment plan to help update your account. A lender may be willing to cut some slack to a borrower making an effort to sort things out. Setting up a repayment plan is a lot less hassle for car loan providers than repossessing and selling a vehicle.

Sell Your Car

If worse comes to worst and you want to maintain a good relationship with your cosigner, you're going to have to sell your car. Chances are it will be repossessed sooner or later if you can't pay what you owe, so you might as well offload it yourself. You'll get more money selling it privately than it would raise at auction, and won't have to pay any additional fees your lender slaps on you. Any shortfall between what you get for your car and your outstanding loan amount will still have to be paid.

About the Author

Michael Roennevig has been a journalist since 2003. He has written on politics, the arts, travel and society for publications such as "The Big Issue" and "Which?" Roennevig holds a Bachelor of Arts in journalism from the Surrey Institute and a postgraduate diploma from the National Council for the Training of Journalists at City College, Brighton.