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Loan To A 16-Year-Old

Answered by: 
Andy Zavoina

Question: 
One of our consumer officers made a loan to an employee and his 16 year old son as co-applicants. Of course, the 16 year old is well below the 18 year old limit for entering into a contract, so his signature is essentially worthless. My question is, are there any other issues we need to worry about - such as notifying the father that he alone is responsible for the loan and reporting the 16 year old's credit to credit reporting agencies.
Answer: 

State laws may vary and this was years ago, but I had a customer who was going to buy his 16 year old son a car. He wanted the 16 year old on the loan so he would feel responsible. Both worked in the family business so the appearance was that the son was in fact paying for his own car. I did not want the son as the primary borrower.

Counsel said that I could do the loan as dad and son. Son wasn't legally obligated to repay, but could. What surprised me most was that son could be liable when he reached 18, even though he entered into the contract as a minor, or so I remember it.

The loan was never a 10 day delinquent so none of this was ever tested.

First published on BankersOnline.com 06/2/03

First published on 06/02/2003

Filed under: 
Lending
Filed under lending as: 
Employee
Reporting

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