Cosign car loan how to get out

A cosigner can be invaluable when you need help qualifying for an auto loan but, as circumstances change over time, one or both parties may want to remove the cosigner from the arrangement so they can go their separate financial ways.

For their part, the cosigner may no longer wish to bear the risk associated with guaranteeing the loan and the effects on their credit should the borrower default. The borrower, on the other hand, could have become more financially established and doesn’t need the assurance provided by the cosigner.

In these situations, it’s often possible to remove a cosigner from an auto loan and there are various options for borrower and cosigner to consider.

How to remove a cosigner from a car loan

Request a release

Some auto lenders will enable a cosigner to be released from a loan if certain conditions are met. Check your contract or ask the lender if this is available to you.

Refinance

One of the most straightforward ways to remove a cosigner is for the borrower to refinance the loan on their own. Refinancing involves taking out a new loan, typically with a different lender, that is used to pay off the previous note and provide new terms going forward. This may be an option if you’ve been making regular, timely payments, your credit score has been creeping up the scale and you’re now considered more creditworthy.

Online lenders such as RoadLoans enable consumers to apply for refinancing in a few minutes and get an instant decision. If approved, besides the opportunity to take responsibility for a loan independently, you may enjoy benefits like a lower interest rate or more comfortable monthly payment.*

Pay off the loan

If you have the money, perhaps from a tax return or savings, you could simply pay off the note and live without a car loan completely. You would firstly want to get the payoff amount, which is different to the current balance, from your lender then follow their steps to clear your debt so you can own the car free and clear.

Sell the car

So long as you’re not upside down on the loan, selling the car and using the proceeds to cover the payoff amount is another potential option. The decision to sell the vehicle is that of the borrower because, although the cosigner has obligations to the financing, they have no rights to the vehicle.

See if you can remove a cosigner from your loan

If refinancing sounds like a good option to you, learn more about RoadLoans’ auto refinancing products  and complete our free online application for a quick decision.

Apply for auto refinancing.

*RoadLoans does not accept auto refinance applications from existing Santander Consumer USA and Chrysler Capital customers.

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Category: Bad Credit, Financing

Rob Looker is a senior copywriter for RoadLoans, I write about cars, money and their meeting place at the junction of direct auto lending. I’m a huge fan of nice cars, and have plenty of experience with the less than…

If you have decided that co-signing a loan for a loved one wasn’t a good idea, you’re probably experiencing co-signers' regret. Removing your name from a co-signed loan won't be easy. For some debts, it may not even be possible.

Co-signing a loan or credit card basically tells the bank that you’re willing to make payments if the other person doesn’t. It also means the bank can pursue you for payment even if the other person files bankruptcy or dies before the debt is paid. By co-signing a loan, you assume responsibility for the debt just as if it were yours alone.

As a general rule, lenders won’t remove your name from a co-signed debt unless the other person has demonstrated they can handle the loan on their own. You never would have been asked to co-sign if the other borrower had shown this ability from the beginning. If things have changed since then, the lender definitely will want proof.

Removing Your Name From a Co-Signed Loan

If you co-signed for a loan and want to remove your name, there are some steps you can take:

• Get a co-signer release. Some loans have a program that will release a co-signer’s obligation after a certain number of consecutive on-time payments have been made. Sallie Mae, for example, allows student loan borrowers to apply for a co-signer release after 12 months of payments if credit and other requirements are met. Read through your loan documents to see if there is any type of program associated with your loan. Or, call the lender and ask if something like this applies to your loan.
• Refinance or consolidate. Another option is to have the other borrower refinance the loan into their name. To qualify for a refinance, the borrower needs to have a good credit history and enough income to make the new loan’s monthly payments. Consolidation is common with student loans. A qualifying borrower can use the consolidation loan to pay off the loan you co-signed. The original co-signed loan would still be listed on your credit report, but it should indicate the account is closed and paid in full. Payments—and nonpayments—on the consolidation loan won't affect you if your name is not listed on the loan.
• Sell the asset and pay off the loan. If you co-signed on a home or car loan and the other person isn’t making the payments as necessary, you may be able to sell the asset and use the money to pay off the loan. Your name must be on the title to sell the property to someone else.

Removing Your Name From a Credit Card

A credit card issuer may willingly remove your name from a credit card account if there’s no balance on the card. However, if there is a balance, you’ll have to pay it off before you can make these types of changes to the account:

• Transfer the balance. The other borrower may be able to transfer the balance to a credit card that’s in their name only. Once the balance is transferred, close the credit card so future charges can’t be made to the account. To keep future charges from being made, you can ask the credit card issuer to add a comment in their system indicating that the credit card account should not be reopened.
• Pay off the balance yourself. It won’t be fun paying a credit card balance you didn’t make and didn’t benefit from. However, paying the balance is better than ruining your credit rating and having debt collectors pursue you. You can even close the account or have the credit card issuer freeze the credit limit so no future charges can be made to the card, especially while you’re trying to get rid of the balance. Capital One, for example, provides a number to call for these services but stresses that joint account holders cannot be removed.

Removing Your Name From a Forged Loan

When a loved one has forged your signature on a loan, it puts you in a tough spot. You don’t want to be held liable for a decision you never made, but you also want to avoid having your loved one be arrested for forgery or fraud—something that could happen if you blow the whistle to get yourself off the hook.

Note

Experian, one of the three credit bureaus, recommends reporting a forged loan to the Federal Trade Commission as identity theft.

Lenders won’t remove your name from a forged loan unless you report the forgery to the police or give them a signed affidavit including the forger's admission of guilt. Both put your loved one at risk of legal action. If you don’t let the lender know of the forgery soon after you find out, your silence could be interpreted as an acknowledgment. In short, to be liable for the loan unless you are willing to report your loved one's crime.

Protect Your Credit

If you can’t get the lender to remove your name from a co-signed loan or credit card balance, your best option is to at least keep up the minimum payments until the balance is paid off or until the other borrower can get the account in their own name.

Co-signing may not become an issue unless the other person isn’t keeping up with the payments, so get into the habit of checking the payment status, especially in the days leading up to the due date, on the due date, and the date after. Don’t wait too long because late payments go on your credit report after 30 days.

Frequently Asked Questions (FAQs)

Who can co-sign a loan?

Generally, anyone with a good credit score and the ability to repay your loan can be a co-signer. In most cases, a parent or other close relative is the most likely co-signer, but it doesn't have to be a family member.

How do I find out if my co-signed loan is defaulted?

You should always monitor your credit report for any red flags, and that's especially true if you have co-signed on a loan. If the person with whom you've co-signed is more than 30 days past due, it may show up as a negative mark on your credit report.

What happens when the primary owner of a co-signed loan files for bankruptcy?

When someone files for bankruptcy, any co-signers on their debt may or may not be protected, depending on the type of bankruptcy. In a Chapter 7 bankruptcy, co-signers are still on the hook for the debt. In a Chapter 13 bankruptcy, however, co-signers are at least temporarily protected during the initial stay while the bankruptcy case is examined. If the primary owner negotiates a lower debt payment, the creditor may seek to collect the rest from co-signers.

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Sources

The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.

1. Federal Trade Commission Consumer Information. "Co-Signing a Loan."

2. Office of the Minnesota Attorney General. "Cosigning a Loan."

3. Sallie Mae. "Apply to Release Your Cosigner."

4. Wells Fargo. "Consider Refinancing."

5. West Virginia Department of Motor Vehicles. "Titles."

6. National Foundation for Credit Counseling. "Ask an Expert: What Can I Do if I Cosigned a Car Loan for a Vehicle That Is Inoperable and Repossessed?"

   How can I get Out of a cosigned loan?

   This option is only applicable to those who cosigned for secured loans. If the original borrower is not paying the monthly amortization of their mortgage or car, then you can opt to sell off that collateral so you can use it to pay off the cosigned loan. The second type of debt that you may have cosigned to are credit cards.

   Can you remove a cosigner when refinancing a car?

   Refinancing is replacing your current car loan with a new one. If you can qualify for the loan by yourself, you can remove the cosigner when you refinance. Most borrowers refinance to lower their monthly payment, but you can also remove a cosigner or co-borrower.

   How do I get a cosigner release?

   If you cosigned for a loan, one of the quickest routes out is to apply to the lender for a cosigner release. This lets the cosigner off the hook, so that only the primary borrower is the one listed on the loan going forward. It’s not quite so simple, however.

   What are the responsibilities of a cosigner on a car loan?

   When a person cosigns a car loan, he or she is taking equal responsibility for the loan. If the primary borrower cannot or does not pay the loan as agreed, the cosigner is responsible for making the payment.