How to Get a Cosigner Off a Car Loan

A car loan cosigner is an individual who agrees to share responsibility for a car loan, typically to help the primary borrower qualify for financing or secure more favorable loan terms. Lenders often require a cosigner when the primary borrower has a limited credit history or a lower credit score, as the cosigner’s creditworthiness provides additional assurance of repayment. Removing a cosigner from a car loan can reduce their financial liability and improve their debt-to-income ratio, which can be beneficial for their own credit standing and future borrowing capacity. It also allows the primary borrower to manage the loan independently, reflecting improved financial stability.

Meeting Lender Requirements

Before a cosigner can be removed from a car loan, the primary borrower needs to demonstrate sufficient creditworthiness to assume sole responsibility for the debt. Lenders will evaluate several factors, with a consistent payment history being paramount; many lenders require a track record of 12 to 24 months of on-time payments on the existing loan.

Lenders also assess the primary borrower’s current credit score and credit history. A FICO score generally above 670 is considered good credit, while scores in the 700s often secure the most favorable rates. Additionally, a borrower’s current income and debt-to-income (DTI) ratio are reviewed to confirm they have the financial capacity to handle the monthly payments without the cosigner’s support. The age of the loan and its balance relative to the car’s current market value are also considered. To assess their readiness, borrowers should obtain their credit report and score and review their loan statements to confirm their payment history and current loan balance.

Pursuing a Cosigner Release Program

Some original lenders offer a formal cosigner release program. Contact the current lender directly to determine if such a program is available and to understand its requirements. Not all lenders provide this option, and those that do often have strict criteria.

If a program exists, the process begins by initiating contact with the lender’s loan servicing department to request information about cosigner release. The borrower will need to submit an application, providing updated financial documentation. This may include recent pay stubs or bank statements for income verification, along with the lender conducting a new credit check to confirm the primary borrower’s current financial standing. The lender then reviews the application, assessing whether the borrower meets the program’s specific thresholds for payment history, credit score, and income, before notifying them of their decision.

Refinancing the Loan

Refinancing the car loan is an effective method to remove a cosigner, as it involves taking out a new loan solely in the primary borrower’s name to pay off the existing one. Before applying, research current interest rates and loan terms offered by various financial institutions, including banks, credit unions, and online lenders, to ensure a new loan would be beneficial.

To apply for a new loan, the primary borrower will need to gather financial documents, such as proof of income (e.g., pay stubs, W-2 forms), identification, and details of the current loan, including its payoff amount. The borrower submits the new loan application. The new lender will conduct a credit check and evaluate the borrower’s financial profile to determine eligibility and terms. Upon approval, the new loan funds are used to pay off the original car loan, and the new agreement is solely in the primary borrower’s name.

Alternative Approaches to Release

Beyond formal release programs or refinancing, other methods can lead to a cosigner’s release from a car loan. One approach involves selling the vehicle and using the proceeds to fully pay off the outstanding loan balance. Before selling, determine the car’s market value and contact the lender for the exact payoff amount and instructions on handling the title transfer, as the lender holds a lien on the vehicle until the loan is satisfied.

Another method is to pay off the entire car loan early. If the primary borrower has the financial capacity to make a lump-sum payment or accelerate monthly payments to reach a zero balance, the loan obligation ends, and the cosigner is released. While this option provides the quickest path to release, borrowers should check their loan agreement for any prepayment penalties, which can sometimes be assessed if the loan is paid off significantly ahead of schedule.