An Ontario man is warning others to think twice about agreeing to be a co-signer on a new car after he ended up on the hook for a $62,000 purchase.
“I went in as a co-signer and I had no idea that this could happen,” Mississauga resident Shane Brown told CTV News.
Three years ago, Brown said he decided to help his friend buy a car as she was unable to qualify for the loan herself. He said she was buying a 2019 Ford Escape with a financing agreement that came to $62,533.
A year after the purchase, Brown said he learned his friend’s ex-boyfriend had vandalized the SUV so badly that it was no longer driveable. That’s when she quit making the payments, Brown said, putting him in a difficult position.
“I wanted to help a friend and that’s why I signed the loan. If I would have known what would have happened, I never would have signed it,” said Brown.
The car has been sitting at a collision centre for the past year and has not been repaired due to some insurance issues. According to Brown, he has to keep making $700 monthly payments.
“I’m paying for something I’m not even using,” said Brown.
A spokesperson for National Bank—who Brown co-signed the loan with—told CTV News the name of the primary borrower must be included in the contract and financing documents.
“Co-borrowers can also be added in the financing request, even though they are not listed on the purchase contract, thus becoming responsible for the loan,” the statement reads.
“As for co-borrowers, they must be explicitly listed in the financing application in order to be included on the loan. If a co-borrower is not mentioned in an application, they cannot be held responsible for the loan.”
Doug Hoyes, a licenced insolvency trustee with Hoyes, Michalos and Associates, tells CTV News that co-signers are “100 per cent responsible” for the loan.
According to Hoyes, someone who co-signs a loan can find themselves in a financial trouble. Co-signing can increase your debt-to-income ratio, affect your credit score and leave you responsible for unpaid debt. Plus, Hoyes says it can also damage your relationship with the primary borrower.
“The common examples are: ‘I co-signed for my boyfriend, my girlfriend, my spouse and now we are no longer together. I’m left holding the bag.’ The other example is a parent co-signing for their adult child,” said Hoyes.
Brown says he feels stuck in a hopeless situation and wishes he never agreed to be a co-signer.
“What’s the point of co-signing for somebody,” said Brown. “My friend turned their back against me, how is that supposed to make anyone feel.”
Hoyes also told CTV News another area where people feel pressured to co-sign loans is when children ask their parents to co-sign mortgages.
