You can remove yourself from a cosigned loan, but it requires the primary borrower to qualify for the loan alone, usually through refinancing, selling the asset (for secured loans like cars/homes), or if the lender offers a specific cosigner release program after certain conditions (like consistent on-time payments) are met, as lenders aren't obligated to release you unless the debt is fully handled.
Get a loan release
Some lenders have a release option for co-signers, according to the Consumer Financial Protection Bureau. A release can be obtained after a certain number of on-time payments and a credit check of the original borrower to determine whether they are now creditworthy.
A cosigner can't remove themselves from a car loan without working with the primary borrower, who may have to start the process. For instance, with a refinance, the primary borrower must apply for a refinance loan on their own. The cosigner can't sell the vehicle or transfer the loan without the primary borrower.
Removing yourself as a cosigner on a loan can be tough and requires the primary borrower's cooperation. Some loans have a cosigner release provision. The primary borrower could also refinance the loan or pay off the entire debt to remove your cosigner obligation.
However, there is a downside to consider. Being removed as a cosigner from a loan could potentially hurt your credit scores.
In general, the terms of the co-signed loan cannot be undone. To reverse the co-signer's obligation, the co-signed loan must be paid off, or refinanced, with or without a new co-signer.
If I Cosign a Loan, What Can I Do To Protect Myself?
Some lenders may require 12 timely payments before you can release a cosigner, but others may require 24, or even 48. Generally, payments must be consecutive without periods of deferment or forbearance, and fixed or interest-only payments you make during college may not always count.
Be sure to check your contract and see if there's a cosigner release option. Sell or Trade In the Car and Pay Off Your Loan – You can also sell or trade in the car and pay the loan in full! This will release both you and the cosigner from the loan as long as you sell it for enough to cover the balance.
So in summary, there are three ways to remove your name from the obligation of a mortgage debt. Co-owner refinances after quit claim deed. Sell the property and pay off or settle mortgage debt. Quit claim house to co-owner and file bankruptcy.
Sell the car
Removing the lien means paying off your entire loan balance. If you can sell the vehicle for what you owe on the loan (or hopefully more), the payoff amount goes to the lender, who removes the lien and you both can take your names off the title and relinquish ownership.
A cosigner can be removed by refinancing your auto loan, receiving a cosigner release or paying off the loan. Before removing the cosigner, ensure your credit score is high enough to receive the same or comparable interest rate if you refinance.
If you cosign a debt and the borrower doesn't pay, in most every case you will be responsible for the entire debt. And, the lender does not have to try to collect from the borrower. It can look to you even if it might be possible for it to collect from the borrower.
It can affect your credit scores.
Because a co-signed loan is recorded on your credit reports, any late or missed payments can have a negative impact on your credit scores. If the borrower defaults on the loan and ceases payment, the debt may be referred to a collection agency.
Both voluntary and involuntary car repossessions can affect a cosigner's credit because each person shares the responsibility. However, a cosigner benefits from the same rights as the primary borrower if a repossession occurs.
You cannot simply remove your name from a joint car loan, but there are options. For example, the co-borrower can refinance the loan as a solo borrower.
FAQs for borrowers
Yes, you can typically have a co-signer to help qualify for a mortgage, but it also depends on the mortgage product. How long does a co-signer stay on a mortgage? A co-signer stays on the mortgage until it is paid off, refinanced or removed through a loan modification.
Legitimate lenders perform credit checks, verify income, and assess your ability to repay. If they skip that process, they're likely betting on your desperation. A lack of physical presence or poor customer service access is a major red flag.
The risks to the cosigner
To avoid a missed payment or late payment hurting the credit score of the cosigner, the cosigner should make sure that payments are being made on time and if the primary borrower cannot make the payment on time, the cosigner should make the payment.
With a 700 credit score (considered "Good"), you're well-positioned to get approved for most major loans like mortgages, auto loans, and personal loans with more competitive interest rates and terms than someone with a lower score, plus you'll qualify for better rewards credit cards and may even see lower insurance premiums. You can access a wide range of financial products, but to get the best rates, scores above 740-760 are often needed.