How to Get a Co Signer Off Car Loan

How to Remove a Cosigner from a Car Loan

Posted by Frank Gogol

Qualifying for an auto loan can be difficult for those without a high income or a good credit score, so many buyers need a cosigner. However, if having a cosigner later becomes unnecessary or the cosigner no longer wants the financial responsibility, then you may want to remove them from the loan.

Removing a cosigner can be done in a few ways, including transferring the debt to a credit card or refinancing. Read the following article for a breakdown of the process of removing a cosigner from an auto loan.

What is a Cosigner?

Lenders require that a borrower meets certain eligibility requirements, typically including a minimum income and credit score. However, if the borrower cannot meet these minimum requirements, a cosigner that does meet these requirements can jointly sign the loan. The cosigner, then, guarantees the loan and will take over responsibility for repaying the loan if the primary borrower is unable.

Can a Cosigner be Removed from an Auto Loan?

People's financial circumstances can change radically, and sometimes having a cosigner is no longer necessary or tenable. In this situation, the primary borrower may wish to remove the cosigner from the loan.

You can remove a cosigner from an auto loan, and the best way to do so is by refinancing. If you have improved your credit score or income, or if you find a lender with lower eligibility criteria, you can refinance with more favorable rates. However, there are also other strategies that you can employ to remove your cosigner.

How to Remove a Cosigner

Removing a cosigner can be done in a variety of ways, including:

Paying the Balanace
Releasing the Loan
Transfering to a 0% APR Credit Card
Refinancing the Outstanding Balance

See the following section for a summary of some of the steps that you can take to remove a cosigner from your auto loan.

Pay the Balance

If possible, the simplest way to remove a cosigner from a loan is by paying off the balance of the loan in its entirety. This will release both the cosigner and the primary borrower from any further obligations to the lender. Even if you cannot pay off the entire balance, paying off most of the loan will drastically reduce the burden and obligations of the cosigner.

However, most people simply don't have the option of paying off their auto loans in full.

Release the Loan

Certain lenders give co-signers a release option. While the terms of release can vary, obtaining a release typically involves making a certain number of on-time payments on the loan. Also, lenders will usually complete a credit check of the primary borrower to determine creditworthiness. So, you may not be eligible for a release if the primary borrower has a poor credit score.

Lenders are reticent in providing information about whether cosigner release is an option, so you will likely have to inquire directly with your lender. Take advantage of the sample letters for requesting a cosigner release that CFPB has posted on their website.

Transfer to a 0% APR Credit Card

Borrowers who can qualify for a 0% APR credit card can get one and use it to pay off their auto loans. 0% APR credit cards typically provide a 6-18 month period where you pay zero interest. Once the loans are paid off with the credit card, the entire debt will be in the name of the credit card holder borrower, and the cosigner will be released of obligations.

However, the borrower may have to pay a balance transfer fee of 3% or 5%, which can add up to a hefty sum.

Refinance the Outstanding Balance

You can release a cosigner from your original auto loan and potentially obtain better terms and rates than your initial loan by refinancing. Refinancing simply involves taking out a new loan and using those funds to pay off your auto loans. The new loan will be in the name of the primary borrower, and the cosigner for the previous loan will be released.

When Can a Cosigner Be Removed from a Car Loan?

A cosigner can, more or less, be removed at any point during the lifetime of a loan. How you choose to go about it and your financial situation — as in the case of refinancing the loan — may impact your ability to take advanatage of some options, though.

3 Simple Steps to Applying for a Refinancing Loan

If you are considering applying for a personal loan for refinancing, just follow these 3 simple steps.

Apply

Apply online for the loan amount you need. Submit the required documentation and provide your best possible application. Stronger applications get better loan offers.

Accept

If your application meets the eligibility criteria, the lender will contact you with regard to your application. Provide any additional information if required. Soon you'll have your loan offer. Some lenders send a promissory note with your loan offer. Sign and return that note if you wish to accept the loan offer.

Repay

The loan then gets disbursed into your U.S. bank account within a reasonable number of days (some lenders will be as quick as 2-3 business days). Now you need to set up your repayment method. You can choose an autopay method online to help you pay on time every month.

Personal Loans

for Visa Holders!

Loans for up to $35,000. No cosigner required. No prepayment penalty.

4 Benefits of Refinancing Your Auto Loan

Borrowers can get a range of benefits from refinancing their auto loans. See the following section for a few examples of how refinancing can save you money and stress.

1. You Could Lower Your Interest Rate

The interest rate that you get depends on the strength of your finances, as well as the policies of the lender. If you have improved your credit score or income since you took out your initial auto loan, you may get a better interest rate on your refinanced loan. A new lender may also assess your eligibility and finances differently, so it is worth investigating refinancing even if your income or credit has not improved.

2. You Could Lower Your Monthly Payment

One benefit of refinancing is that you can choose a repayment schedule for your loan that better suits your current financial circumstances. So, if your monthly payments are too high, by extending your repayment schedule you can lower them. While this will increase the total amount that you pay, freeing up some funds in the short term can be valuable.

3. You Could Change Lenders

Some lenders are unresponsive to customers or offer poor terms and rates. By refinancing, you can switch to a new lender with better customer service, and improve your loan terms.

4. You Can Release Your Cosigner

When you refinance, you pay off all of your old auto debt and start making payments on the new loan. Since the old loans are paid off, the cosigner of those loans will be released. The borrower who refinances then solely holds the obligation to repay the loan.

Frank Gogol

I'm a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.

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How to Get a Co Signer Off Car Loan

Source: https://www.stilt.com/blog/2018/12/cosigner-removed-auto-loan/