Getting Out of a Co-Signed Loan That's Ruining Your Credit
The majority of co-signed loan arrangements are a result of an act of kindness. However, if the family member or friend you agreed to help is delinquent on payments, your credit may be at risk. According to a co-signing survey from CreditCards.com, about 28% of co-signers experienced a drop in their credit score because the person they co-signed for paid late or did not make any payment. As long as you are a co-signer for a loan, you will be liable for the borrowed amount.
If you co-signed a loan that is ruining your credit and want to understand your options for getting out of the loan, consulting with experienced consumer credit protection attorneys is crucial for proper guidance. Our experienced team at Stecklein & Rapp can evaluate your unique circumstances and explore your best possible options to get out of the co-signed loan. We are proud to serve clients throughout Kansas City, Missouri, Kansas City, Kansas, and Lincoln, Nebraska.
The Downsides of Co-Signing
Co-signing for a loan is a process through which a person (the co-signer) guarantees a loan taken out by another person (the borrower). Co-signing is often required when a potential borrower doesn't have income, has bad credit, or has no credit history at all.
When you co-sign for any form of loan, you automatically become responsible for the amount of money that was borrowed. Some of the downsides of co-signing for a loan include:
- You're responsible for repaying the loan if the borrower defaults, dies, or files for bankruptcy.
- The loan will appear on your credit reports.
- It can limit your borrowing power or ability to get a loan for yourself.
- You will become stuck with the loan.
- Your relationship with the borrower will become strained over time.
- The lender may decide to sue you if the loan remains unpaid.
- Above all, your credit could take a plunge.
Options for Getting Out of the Loan
The possible options to get out of a co-signed loan that is ruining your credit include:
Transfer the Balance to a 0% APR Card
Provided that the borrower gets approved, they can transfer the loan balance to a 0% interest credit card. The cards usually have an introductory 0% annual percentage rate (APR) period of between 12 and 18 months. This hopefully gives the borrower sufficient time to offset the balance without accumulating interest.
Get a Loan Release
If the lender provides a release option for co-signers, you can get out of a co-signed loan, but a release may only be obtained after the borrower has made regular payments for a specified amount of time and has become creditworthy.
Refinance or Consolidate the Debt
Refinancing allows you to replace a loan with another loan that has better terms while consolidating allows you to replace multiple debts with a single new debt. Since both require taking out a new loan, your name won't be on the newly refinanced or consolidated loan.
Sell the Financed Asset
If you co-signed for a loan to finance the purchase of an asset, such as a home or car, and the other person is delinquent on payments, you may sell off the asset. The proceeds from the sale can be used to pay off the loan.
Pay Off the Loan Balance
If the other person isn't making any reasonable effort to repay the loan or even build their credit, it may be time to accept your loss and settle the debt balance. Paying off the balance can at least prevent additional damage to your credit score.
Get the Experienced Legal Guidance You Need
Co-signing can be very risky. Even though you are helping a loved one qualify for a loan, you are acting as a guarantor and volunteering to make payments if the other person defaults. If you co-signed for a loan and want to remove your name, it is important that you consult with an experienced consumer credit protection attorney for detailed guidance.
At Stecklein & Rapp, our team has the experience, resources, and insights to assist and guide clients in complex legal matters involving co-signed loans or credit cards. As your legal counsel, we will review your situation and educate you about the available options to remedy your situation and get yourself out of the co-signed loan. Our team will fight to protect your credit and negotiate with the lender to reach a feasible resolution. We will work to craft an effective strategy to help rebuild your credit and avoid potential pitfalls.
Contact us at Stecklein & Rapp today to schedule a simple case assessment with knowledgeable consumer protection attorneys. With locations in Kansas City, Kansas, Kansas City, Missouri, as well as Lincoln, Nebraska, our attorneys will fight on your side to ensure that the co-signed loan doesn't ruin your credit. Call us today to get the help you need.