At first, getting a car loan with a co-signer may seem like a good idea, but things don't always go as planned. The primary borrower and the co-signer's relationship could go bad, or the co-signer's finances could change, prompting the co-signer to want out of the deal.
It is possible to get rid of a co-signer from a loan, but it is unlikely that a new co-signer can be added to the same loan. The process is more complicated and can include refinancing the loan, filling out paperwork to release the co-signer, or just paying off the loan in full to get rid of the co-signer. Here are some pointers for you if you consider switching your car loan's co-signer.
Most lenders won't just swap out a co-signer on an existing car loan with a new one. This is because they would have to go through the approval process for a new car loan. Even though it never hurts to ask the lender, swapping one co-signer for another on an existing loan is not common. Most of the time, the loan modification process changes the terms and conditions of a loan. It is not advised to change the people who signed the loan agreement.
Refinancing the loan is yet another way to eliminate a co-signer on an auto loan. In other words, you should start a whole new loan that pays off the balance of the old loan and closes the account. The new loan can be started with a different lender and doesn't need the co-signer's help. It might be opened with the same lender, but that's not always possible.
To do this, you need to be able to get a new loan on your own, which means you need a good credit score and a history of making payments on time. If your credit has improved from the time you bought the car, refinancing may also give you a chance to get a better interest rate or change the terms of your loan payments.
Some lenders will let you get rid of a co-signer if you fill out a co-signer release, but not all of them will. You should talk to the lender who gave you the loan and ask if there is a way to get out of being a co-signer.
If the lender allows you to release the co-signer, you will usually have to fill out paperwork that eliminates the co-signer from the loan and makes you the main person responsible for paying back the loan. The main borrower can only make this change to the loan.
There's no guarantee that the lender will approve the co-signer release. You will have to prove that you can take care of the loan on your own by having a good credit score and enough money to pay back the loan.
When you make this kind of change, the length of your loan may change. Getting rid of a co-signer could also change the interest rate on your loan, especially if the loan was approved because of the co-signer's good credit.
It's not as easy or simple as it sounds to switch or get rid of a co-signer on a car loan. Most of the time, you'll have to refinance the loan, pay it off in full, or get a co-signer release if the lender even gives you that option. Before you ask someone to co-sign a loan for you, consider it carefully, and make sure you choose someone reliable.