If you think co-signing an auto loan for a friend or relative is no big deal and you’re just trying to help them out, you’re wrong.  New scams target co-signers to make them the primary person on the auto loan.  With a quick paperwork change, the co-signer can actually become the loan holder and the person driving the car is not financially responsible at all.

Check out this Q and A from Terry Jackson and Bankrate.com about Carlos, who co-signed an auto loan and is now in big financial trouble.

“Q: Dear Terry,

A so-called friend wanted to get a car and he couldn’t get approved for a loan.  So, I did him a favor and co-signed for him.  It hasn’t even been six months yet and he returned the car to me.

The dealership was so slick that they had put me as the main person on the loan, which I was told was just to co-sign for him.  I don’t want this car and already have my own car loan. What should I do?

— Carlos

 A: Dear Carlos,

When you co-sign for someone, you are telling the lender you’ll guarantee payment on the loan.  The order in which your name is listed on the loan does not matter.  When the payments stop, the lender will come after you, because the lender made the loan on your say-so.

Are you on the title to this car?  Did your friend give you power of attorney so you can sell it?  Selling the car and paying the balance that will undoubtedly be owed on the remainder of the loan is your best option to protect your own credit rating.

You can see if the bank will accept a short-sale — the lender agrees to accept whatever you can get for the vehicle — or just let them repossess it.  But with either of these options, your credit will be scarred.

This is just another example of why people shouldn’t co-sign for other people.”