When you co-sign a car loan, you're essentially promising to cover the monthly payments if the primary borrower can't, yet you won't hold any legal rights over the car. With co-ownership both the owner and the co-owner are named on the title, giving them equal rights and obligations towards the vehicle and the loan.
The answer is no, the cosigner has no legal right to take possession of the car. As a cosigner, you don't have legal ownership rights to the vehicle. In other words, a cosigner is on the vehicle's note (making them liable for the payments) but not the car title (which indicates ownership).
An auto loan co-signer is a person — often a family member — who takes responsibility to make any missed payments or repay an entire loan if the primary borrower doesn't. An auto loan co-signer doesn't have any ownership rights for the financed vehicle, and their name isn't on the title.
While you don't necessarily have the same rights to the vehicle as the primary borrower, you – as the co-signer – are equally responsible for ensuring the loan is paid back.
Unfortunately, since you have no legal rights to the vehicle, the primary borrower has to take the initiative to remove someone's name from the contract. Cosigners can't take possession of the vehicle they cosign for or remove the primary borrower from the loan since their name isn't on the vehicle's title.
You can often remove a cosigner at any point during the loan period. Your loan paperwork might dictate specific terms, though. For example, some lenders require 24 months of on-time payments from the primary borrower before they'll consider releasing the cosigner.
Pay off the loan
The most painless way to remove a co-signer is to simply pay off the car loan. If the removal is due to financial strain this may not be the most practical option but paying off the loan in full will rid the responsibility of both the primary borrower and the co-signer.
Being a co-signer doesn't give you rights to the property, car or other security that the loan is paying for. You are the financial guarantor, meaning you must make sure the loan gets paid if the primary borrower fails to do so.
Co-signing means promising to pay back a borrower's loan if the borrower fails to pay. You have the responsibility of repaying the debt, but you don't have any right to use the loan proceeds. Read: Best Personal Loans.
Co-signing means you are responsible for covering payments if the main borrower cannot, but you do not have any legal rights to the car. Co-owning means both parties have equal ownership and financial responsibility for the car.
Refinancing the loan: If you want to remove a cosigner from your car loan, you may be able to refinance the loan in your name so it becomes your responsibility alone. For example, if you've recently gone through a divorce and your ex-spouse is a cosigner on your loan, you could refinance the loan in your name only.
You may be wondering if you can go about removing a cosigner from a car loan, and the answer is yes, you can. Often, you can simply contact your lender to get a cosigner released, but sometimes it can be more complicated.
The bottom line. Switching or removing a co-signer on a car loan is not as simple or as straightforward as it sounds. Often, you will need to refinance your auto loan, pay it off altogether or go through the process of completing a co-signer release — if the lender even offers this option.
Your best option to get your name off a large cosigned loan is to have the person who's using the money refinance the loan without your name on the new loan. Another option is to help the borrower improve their credit history. You can ask the person using the money to make extra payments to pay off the loan faster.
The lender may take legal action against you, pursue you through debt collection agencies, or sell the debt to a “debt buyer” to try to collect the money that is owed on the loan if the borrower does not pay or defaults on his or her repayment obligations.
Acting as a co-signer can have serious financial consequences. First, co-signers assume legal responsibility for a debt. So, if the primary borrower is unable to pay as agreed, the co-signer may have to pay the full amount of what's owed. Second, a co-signed loan will appear on the co-signer's credit reports.
Co-signing a car loan is risky and can damage your credit health if the loan isn't responsibly managed. However, there are instances when being a co-signer makes sense: Your relative or friend has a solid employment history and consistent income, and you're confident they will make timely loan payments.
How does being a co-signer affect my credit score? Being a co-signer itself does not affect your credit score. Your score may, however, be negatively affected if the main account holder misses payments.
A co-signer applies for the home loan right along with you. However, they are not on the title of the home. The co-signers name is only on the loan, meaning that while they are financially responsible for paying back the mortgage, they do not have ownership of the property.
Proof of Your Cosigner's Ability to Pay
The bank or lender may require pay stubs or wage vouchers for employed cosigners; if the cosigner is self-employed or a business owner, the bank may require income tax returns for previous years.
Each auto lender has its own credit requirements, but typically a cosigner needs a credit score of 670 or more. Lenders also calculate the cosigner's debt-to-income ratio (DTI), which measures how much of their income goes to pay debt.
If you and your significant other purchased the car together and both of your names are on the title (and on the lease), you may need to sell the car or have one owner buy out the other's share. Otherwise, you still legally share ownership of the car and must work together on splitting its use.
To get your name off of someone's car loan you have the option to request a co-signer release. Selling or trading in the vehicle is another way to remove a co-signer from a car loan. If these aren't options, you can ask them to refinance the loan without you.
You can file an action in small claims court (in some states such as Georgia this is the Magistrate's Court) to recover any amount you have to pay on the borrower's debt, plus court costs.