I had co-signed on a student loan for a family member a few years back. He graduated into the recession and has trouble finding work now. He's been underemployed for the better part of the year and is habitually behind on his student loan payments. At the moment, he's 62 days past due. The lender, Wells Fargo Bank, calls me often about catching up the debt. I always give them the same line: I won't pay because I want the primary borrower to take the responsibility for his own loan. I haven't wanted to bail out the borrower because he's a man now, and don't want to put to him the indignity of charity. He needs to learn to be responsible for himself. And, I haven't minded the credit hit, because my record is otherwise clean, and I don't have any imminent need for credit. But, I wonder if I am indeed taking the right tack on this. I've tried already on getting a forbearance on this loan. It essentially cannot be done because the co-signer (me) is able to pay the loan. I could easily make the loan payments. Doing so would spare credit from any blemish, would ease the burden on the borrower and slightly buttress his credit, and stop the 3 calls per day I get from Wells Fargo (I have them programmed into my phone, so they are easy to avoid when I don't want to talk to them). My wife argues that if I need to apply for jobs again, this blemish on my credit could come back to haunt me. And, if I did make the payments, I force the borrower to dependence on me again when he should be his own man. On the flipside, he's struggled with depression before, and his current predicament can exacerbate depression again. Maybe being his own man isn't possible right now anyway. Or, I could hold the course. The plus-side here is I get to keep my money, and I don't make him dependent on handouts from me. The down-side is my credit score will be adversely affected (by how much?), the bank might take some other sort of collection action against me, and the primary borrower will continue to dig into a deeper financial hole until he gets a better job. So, what say you? Do I take over the loan, or do I let him continue to take on water? Is there a third way? How ornery can a company trying to collect a loan get?
have you talk to your family member about it? like what he should do? maybe you pay it off and then he pays you back? collection agencies can get pretty fiesty if they see you have good credit and if you own property i think depending on the state they may have legal grounds to sue if they can prove that you have the means to pay back the debt but just simply refuse to. I dont know the exact rules since you are not the primary borrower but a co-signer if they could seek legal action EDIT: i talked to one of the supervisors here...the collection agency can sue you too for the money as a co-signer
How much is he behind? What are his long-term prospects in regards to finding employment? I would go down some kind of hybrid path. Catch up on his behalf, or see if you could pay off or take over the note from Wells (preferably at some discount to the current principle), but in all cases only in conjunction with a new loan agreement between you and him.
If you aren't hurting for the money, I would probably pay off his loans for him, and then have him pay you back at the same rates he was paying the bank. As long as you make it clear the only reason you are doing this is for your OWN credit, and he shouldn't get used to the arrangement, I think you would only benefit him by doing this. There's no reason for him to start his life already on a bad foot.
It's not just a dent to your credit... In other words, you probably need to make the payments and work out an arrangement with the borrower.
Well, if you do this, just be prepared to never see a single penny of that money. If the guy can't pay the bank back, what makes you think he's going to pay a family member back? In my experience, family loans are NEVER a good idea. If you give money to a family member, just give it as a gift, not a loan.
You say this about him, but, I've got bad news for you, JV... You're a man now and you need to learn what it means to co-sign on something. This means that you and he share the responsibility together... and this means that you are telling Wells Fargo that, if he doesn't pay, you will... and when you renege on that, you are being just as bad as he is. You must pay.
I would just pay it off, and then get some legal papers drawn up for him to pay you back at the same rate. If you can afford it, I would avoid the credit hit. That's the whole point of being a co-signer. I know you meant well, but you basically gambled your own money and credit that he would be solvent. You can't expect a bank to understand or care and just let it float. I wouldn't bet that he'd pay you back either. But getting it in writing gives you some legal recourse, and might give him a little poke to pay you back quicker instead of him thinking 'I can pay him back tomorrow or in 30 years because he's my relative.' Maybe he gets the idea that this is not just a favor between relatives, but a business deal in adult world w/ ramifications.
My advice: listen to your wife. And not just because it's her money, too...but because she's clearly very wise.
I worked as a collector for a bank in Canada during my Uni days, similar rules to that of the US. You should ask if it hurts your credit. In Canada the secondary doesn't get hit with the default on payment, however is considered responsible when legal preoceedings commence. If so you may want to keep it from going into legal, which usually does not happen until you go 120 days depending on the amount owing. I would call Wells Fargo and get more info....
<object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/3COB5g4RyYY&hl=en_US&fs=1&"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/3COB5g4RyYY&hl=en_US&fs=1&" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object> WWMD? Mike Gundy would pay.
If you decide to pay it off, you should try buying the note and related documents from Wells Fargo so that you have all of Wells Fargo's rights to pursue collection.
The one thing I would actually be worried about. Not much right now - $250 past due, with another $125 to add each month. He's gone delinquent and then caught up a number of times (with family help). He is employed now, in a crap retail job. He just doesn't make enough to cover his loans in addition to his living expenses. His employment prospects are good and bad. He has an MIS degree. He had a good-paying consulting job briefly, but a little bout of irrational behavior lost him that job and got him arrested (terroristic threat). His case won't be concluded until February -- in the meantime, prospective employers will see a disturbing Pending when they run a criminal check. Besides that blemish and the small to moderate risk of future irrational behavior, he can stand to earn decent money. I've had enough of that already. This has been my policy for some time as well. It's a good idea in principle to draw up a private loan between us, but I know the reality will be that it won't be repaid. What are you, a collector? Point taken. You're kissing my wife's ass everywhere I turn. As for her advice, she doesn't want to pay either, she just complains about the credit hit. What she wants is some way where we don't pay, and yet Wells Fargo isn't mad. Thanks for that perspective. I figure I'll need to do something, at the minimum, to keep the balance from hitting the 90-120 day bucket. Maybe his mother will come to his rescue so I won't have to. I had talked to him yesterday, and he said he'd throw a couple of dollars their way, but I don't think he can pay enough to get out of the 60 to 90 day bucket. That's not a long-term solution anyway.
You obviously already realize this, but I generally like to point it out whenever I this topic (no offense intended): The bible says anyone who cosigns on a loan is an idiot (Proverbs 17:18). That said, another tried and true axiom applies here -- don't cut off your nose to spite your face. The fact of the matter is that you are fully liable for that debt now, and you need to sort out your own problems and put your pseudo-parenting urges aside. To make matters worse, you're dealing with the government. It's one thing to mess around with a private financial institution, it's another thing entirely to default on Uncle Sam. The feds can ruin your life. You don't want to test how deep that rabbit hole goes.
^^ Correcting myself -- I just re-read and saw that the lender is Wells Fargo. The other post about student loans threw me off. Forget what I said.
