As a co-signer on a loan, you have certain rights designed to protect you and ensure you’re informed about your responsibilities. Some of the rights you typically have as a co-signer include:
- Disclosure about Co-Signing: You have the right to receive a disclosure explaining what it means to co-sign a loan. This includes information about your obligations, potential risks, and the impact on your credit if the borrower defaults.
- Information Access: You can request information from the lender about the loan’s status. This includes details about payments, the loan balance, and any changes to the loan terms.
- Notification of Default: If the borrower defaults or misses payments, the lender is required to notify you as the co-signer. This notification gives you the opportunity to take action to protect your credit and financial interests.
However, there are certain rights you might not have as a co-signer:
- Control Over the Loan: While you’re responsible for the loan if the primary borrower defaults, you typically have no control over the loan’s management or decision-making. You can’t modify the terms of the loan without the lender’s approval.
- Property Ownership: As a co-signer, you’re responsible for the debt but might not have any ownership rights to the property or item financed by the loan.
- Protections Against Loan Changes: You may not have the right to prevent changes to the loan terms made between the lender and the primary borrower unless specifically stated in the original agreement.
Understanding your rights and limitations as a co-signer is crucial. Always review the terms of the agreement carefully before co-signing any loan, and consider seeking advice from Matthew Jennings, JD, MBA, EA, RFC®, CEP®, CES™, aka Tax King Matt to ensure you understand your responsibilities and potential risks involved.