How to Get Yourself Off a Cosigned Loan

Cosigning a loan helps a primary borrower secure financing but creates a significant financial obligation for the cosigner. The cosigner is equally responsible for the debt, and missed payments can negatively affect their credit. This article outlines steps for cosigners to be released from a loan.

Preparing for Cosigner Release

Before contacting a lender or the primary borrower, review the original loan agreement. This document often contains a “cosigner release clause” outlining conditions for removal. These commonly include a specific number of consecutive on-time payments (often 12 to 24 months) and a review of the primary borrower’s creditworthiness. Understanding these terms provides a roadmap for potential release.

Assess the primary borrower’s payment history. A strong record of consistent, on-time payments is a prerequisite for any cosigner release. While direct access to the primary borrower’s credit report usually requires their permission, you can request this information or review loan statements to confirm payment regularity. Lenders prioritize a demonstrated history of responsible repayment, as it indicates the primary borrower’s ability to manage the debt independently.

Evaluate your own financial standing and credit report. Obtain free copies of your credit reports annually from each of the three major credit bureaus through annualcreditreport.com. This helps ensure accuracy and provides an understanding of your financial position.

Gather all necessary loan documentation. This includes the original loan agreement, recent loan statements, and any correspondence with the lender. Having these documents readily available ensures all relevant information is at hand when discussing release options with the lender or primary borrower.

Direct Methods for Cosigner Removal

One direct method for cosigner removal involves utilizing a cosigner release clause, if one exists in the original loan agreement. Many loans, particularly student or auto loans, may include such provisions. These clauses typically stipulate that after a specified number of consecutive, on-time payments by the primary borrower (often 12 to 24 months) and a review of their creditworthiness, the cosigner can be released. The primary borrower’s income and credit score must meet the lender’s current underwriting standards to qualify.

Refinancing the loan is another common and effective strategy for cosigner removal. This process involves the primary borrower applying for a new loan solely in their name, which then pays off the original cosigned loan. To qualify for refinancing, the primary borrower generally needs a good credit score (often mid-600s or higher) and a manageable debt-to-income ratio (typically below 40-50%). A successful refinance closes the old loan, extinguishing the cosigner’s liability.

Paying off the loan in full is the most straightforward method to remove a cosigner’s obligation. Once the entire loan balance, including any accrued interest and fees, is paid, the loan account closes. All parties, including the cosigner, are then released from their responsibilities. This method is often preferred when the remaining balance is small or the primary borrower has access to sufficient funds.

Selling the financed asset can also facilitate cosigner removal, particularly for secured loans like auto loans or mortgages. If the asset’s sale price covers the outstanding loan balance, the proceeds can pay off the loan entirely. This action closes the original loan account and releases the cosigner. If the sale price is less than the loan balance, the primary borrower must cover the difference to fully satisfy the debt and release the cosigner.

Engaging with Your Lender and Primary Borrower

Initiate communication with the lender. Contact the loan servicer directly, often through their customer service line or a dedicated cosigner relations department, to inquire about their specific procedures for cosigner release or refinancing. Be prepared to provide your account number and clearly state your objective: to understand the steps required to remove yourself as a cosigner. They will guide you on the necessary forms and documentation.

Submit required applications and documentation after your initial inquiry. If pursuing a cosigner release clause, the lender will likely provide a specific application form for the primary borrower to complete, often requiring updated financial information and authorization for a credit check. For refinancing, the primary borrower will need to complete a new loan application, providing income verification, employment details, and other financial statements. Submit all requested paperwork promptly and accurately to avoid delays.

Coordinate with the primary borrower throughout this process, as their active participation is required for most release methods. They will need to complete applications, provide necessary financial documentation, and potentially sign new loan agreements. Maintaining open and clear communication ensures both parties are aware of their responsibilities and the progress of the release efforts.

Confirm your release from the loan. Once the lender processes the request (through a cosigner release clause, refinancing, or full payoff), obtain written confirmation from the lender stating you are officially released from all obligations. This documentation serves as legal proof of your release. Additionally, check your credit reports, accessible through annualcreditreport.com, within a few weeks to ensure the loan no longer appears as a cosigned obligation.