How to Remove Yourself From a Cosigned Car Loan

A cosigned car loan involves a cosigner who pledges to repay the debt if the primary borrower defaults. This arrangement is often used when the primary borrower has limited credit history or a lower credit score, as the cosigner’s stronger financial standing helps secure the loan. While the cosigner does not typically own the vehicle, they assume equal legal responsibility for its repayment. Missed payments or defaults by the primary borrower can negatively impact the cosigner’s credit report and financial health. Individuals may seek to remove themselves from a cosigned loan due to changes in relationships, concerns about financial stability, or personal financial planning.

Understanding Your Current Loan Situation

Before pursuing any removal strategy, gather information about the existing loan and vehicle. Collect loan documents to ascertain the current balance, interest rate, and remaining term. Review the primary borrower’s payment history, noting on-time or late payments, as this influences removal options. Determine the vehicle’s current market value using online valuation tools like Kelley Blue Book or NADA Guides. This requires knowing the car’s make, model, year, and VIN. Understanding the car’s value relative to the outstanding loan balance helps assess options like selling. Obtain current credit scores for both the primary borrower and the cosigner, as these scores are important for qualifying for a new loan or a cosigner release. Identify the loan servicer’s contact information to facilitate inquiries about loan details and payoff statements.

Methods to Remove Your Name

Several approaches exist for removing a cosigner’s name from a car loan. One common method involves the primary borrower refinancing the loan. This entails securing a new loan, ideally in the primary borrower’s name only, which pays off the original cosigned loan. This option is feasible if the primary borrower’s creditworthiness has improved, allowing them to qualify independently.

Another pathway is to sell the vehicle, using the proceeds to satisfy the outstanding loan balance. This eliminates the debt, releasing both the primary borrower and the cosigner. A third method is paying off the loan in full, whether by the primary borrower or the cosigner, which concludes the financial commitment. Additionally, some lenders offer a “cosigner release” option. This allows the cosigner to be removed from the existing loan once specific conditions are met, such as on-time payments and a review of the primary borrower’s credit. This option is not universally available and depends on the original loan agreement.

Steps to Implement Removal

Implementing cosigner removal requires actions tailored to the chosen method.

Refinancing

For refinancing, the primary borrower applies for a new auto loan with a bank, credit union, or online lender. This application requires documentation such as proof of income, current loan statements, and the vehicle’s title or registration. If approved, the new lender pays off the existing cosigned loan, establishing a new loan solely in the primary borrower’s name.

Selling the Vehicle

When selling the vehicle, determine its market value and list it for sale. Coordinate with the loan servicer to obtain an exact payoff quote, including the principal balance, accrued interest, and any fees, valid for a specific “good-through” date. Upon sale, the proceeds satisfy the loan. The lender then releases the lien, and the title transfers to the new owner.

Paying Off the Loan

If paying off the loan in full, contact the loan servicer for a final payoff quote. This quote details the precise amount needed to close the account and specifies a “good-through” date. Payments can be made via wire transfer, certified check, or the lender’s online portal. Once full payment is received, the lender releases their lien and mails the title to the primary borrower, concluding the cosigner’s obligation.

Confirming Your Removal

After executing a removal method, confirm your name has been officially removed from the loan. Contact the loan servicer directly to request formal confirmation of the cosigner’s release. Some lenders provide a document or letter verifying the cosigner is no longer obligated. Obtain copies of your credit report from Experian, Equifax, and TransUnion. You are entitled to a free copy annually through AnnualCreditReport.com. Review these reports to ensure the cosigned car loan no longer appears as an active obligation under your name. If the loan still shows as active or inaccuracies are present, dispute the information with the credit bureau, providing documentation of your removal. This helps ensure your credit profile accurately reflects your financial responsibilities.