Key Takeaways
People get a car loan together for a lot of different reasons. Maybe they're married, in which case it should be shared property. A parent or friend will sometimes co-sign a loan for someone who can't get a loan on their own. Even if you start these relationships and loans with the best intentions, things don't always go as planned. And when they do, you might wonder how you can get out of that co-signed or co-borrowed auto loan. Here are some ways to do it.
Yes, certainly. However, there aren't many ways to get rid of a co-signer on a car loan. This is because the whole point of getting a co-signer is to make it hard for both parties to back out. Remember that people often get co-signers because they don't have enough money or credit to get a loan on their own or because they aren't sure they'll be able to make their monthly payments.
No matter what, banks and other places that lend money prefer co-signers because they give them more confidence that the loan will be paid back. In the end, you can get rid of a co-signer on your car loan, but it can be hard and sometimes complicated.
There are a few reasons why you might need to drop a co-signer from a car loan. Here are some of the most common ones:
Life can change quickly, and sometimes when people co-sign on loans for cars, houses, and other expensive purchases, their significant other breaks up with them. Divorces and other kinds of breakups can be expensive in many ways, and people don't want to have a loan hanging over their heads if they don't plan to keep the item they bought with the loan.
One of the people who co-signed on loan may have just fallen on hard times financially. Unfortunately, they may not be able to make regular payments on the loan and may be looking for a way out of the possible damage to their credit score and other financial problems that could result.
In either case, the other co-signer might want to take them off the loan to protect their credit and their partner's credit score. Or, they might just want to get out of paying back the loan to their partner. In either case, financial stress can be a big reason someone wants to get rid of a co-signer.
Loans can have a big effect on your credit score. You might want to take a co-signer off of a car loan if their credit score declines, and you don't want your credit score to go down because they aren't paying.
If your credit score isn't great, having a co-signer on an auto loan is helpful to get approved because it gives the lender more confidence that you will repay the loan. But people with financial responsibilities and the main borrower may want to get out of the loan for several reasons.
Refinancing your loan is one way to get rid of a co-signer. You'll need to get a new loan from a different lender. Once done, the old agreement is over, and you start with a new loan that doesn't have the co-signer attached anymore.
Refinancing can also give you a chance to lower your car loan's interest rate or even your monthly payment by extending the loan term length. Keep in mind that you will need to make your monthly payments on time and have good to excellent credit to get a refinance.
You must first talk to your lender to get your co-signer off the loan. After getting in touch with them, you can ask for the release if the lender will let you. This paperwork removes the co-signer from the loan and makes you, the main borrower, the only borrower on loan.
One problem with this method is that it might change your initial loan term and interest rate. This is especially true if your loan approval depends on the good credit of your co-signer. If the co-signer is no longer responsible for the loan, your lender may change the terms.
Before the lender agrees to let the co-signer go, you must also show that you have always paid on time. It's also important to know that not all loans have a co-signer release option, so it's a good idea to look into this before agreeing to a loan.
Paying off the car loan is the easiest way to get rid of a co-signer. If the removal is because of money problems, this may not be the best choice, but paying off the loan in full will free both the main borrower and the co-signer from their responsibilities.
To do this, you will have to pay off the loan balance and the payoff amount. You will need to talk to your lender about paying off your loan, especially if you have to pay it off earlier than you originally agreed.
You could also get rid of a co-signer by selling the car and using the money to pay off the loan, as long as you are not "upside down" on loan. This frees the co-signer from paying back the loan if you can't.
Getting rid of a co-signer can take time, so it's best to contemplate before agreeing to a loan with a co-signer. And you shouldn't move unless there are specific reasons to do so. If you still want to get rid of a co-signer, consider your options carefully to figure out which one will work best for you. If you want to refinance your loan or get your co-signer off of it, you should look at your credit score and payment history to ensure you can get a loan on your own.
You can get your name taken off the loan, but the steps you need to take will depend on the type of co-signed loan. You have two choices: let the main borrower take full responsibility for the debt, or you can get rid of the debt completely.
The best way to get your name off a big loan you co-signed is for the person who needs the money to refinance it without putting your name on the new loan. Helping borrower improve their credit history is another option. You can ask the person using the money to make additional payments to pay off the loan faster.