Can a Cosigner Be Removed From a Car Loan?

Can You Remove a Cosigner From a Car Loan?

Removing a cosigner from a car loan can be challenging because lenders view it as risky. Since you may have needed a cosigner to qualify for the loan in the first place, you'll have to prove you can manage the loan on your own in order to remove the cosigner.

When to Remove a Cosigner From a Car Loan

There are several situations where removing a cosigner from a loan may be beneficial:

• Relationship changes with your cosigner: If you're no longer on good terms with the cosigner, removing their responsibility for the loan can prevent further disputes. Removing the cosigner also means you won't have to involve them in future transactions like a refinance or trade-in.
• To reduce relationship tension: Money matters can create stress even in good relationships. Removing a cosigner can eliminate potential stress related to the loan.
• Improved credit score: If your credit score has improved significantly, you may qualify for a refinance loan in your name only. You may even qualify for better terms depending on your credit score and current interest rates.
• Your cosigner is experiencing credit issues: If your cosigner is struggling with debt or needs to improve their debt-to-income ratio (DTI), removing them from the loan can help them qualify for other loans or credit cards.

How to Remove a Cosigner From a Car Loan

You have a few options for removing a cosigner from a car loan. Some options may not be available depending on your lender and your finances.

• Refinance the loan: Many lenders only allow you to remove a cosigner by refinancing the car loan in your name only. Refinancing pays off the existing loan and replaces it with a new loan in your name only. To qualify, you'll need a good credit score and steady income.
• Request a cosigner release: Some lenders allow cosigner releases after a set number of on-time payments. Check your loan agreement or contact your lender to see if a cosigner release is an option for your car loan.
• Pay off the loan: If you have savings or receive a lump sum of money, you can pay off the remaining loan balance and remove the cosigner. Contact your lender for a payoff quote for the exact balance to pay.
• Sell the car: By selling the car for the loan balance or more, you can then use the cash to pay off the loan balance. After the loan is paid off and closed, both you and the cosigner are released from payment obligations.
• Loan assumption: While rare, some lenders allow another car buyer to take over the remaining loan balance. The new borrower will have to meet the lender's credit and income qualifications. Check your loan agreement to see if it contains an assumption clause.

Will Removing a Cosigner From a Car Loan Hurt Your Credit?

Removing a cosigner from a car loan may hurt your credit if you're struggling to make payments and have late or missed payments. If you refinance, a hard credit inquiry and addition of a new account may lower your credit score. Additionally, opening a new loan can lower your average credit age.

Frequently Asked Questions

Take Control of Your Car Loan Responsibly

Refinancing is often the best way to remove a cosigner from a car loan. Start by checking your FICO^® Score^☉ for free to estimate your approval chances. Lenders will review your income, debt and credit history to determine whether you qualify for a new loan without a cosigner.

The new loan may come with different terms, based on your credit and current interest rates. Be sure you can comfortably afford the loan payments on your own before proceeding. Exploring other options is safer and more practical than accepting a loan you can't afford.