While you won't have any legal rights to the vehicle unless granted permission, you must be prepared to cover payments, late fees and collection costs if the borrower defaults. Failing to keep up with car loan payments will negatively impact your credit score.
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.
lenders do not remove co signers from loans. The debt has to be retired. This can be done by paying it off directly or refinancing the loan.
But most states allow cosigners to take primary borrowers to court in the following situations: Cross claims: If you default on or fail to repay the loan, the lender could sue the cosigner for the money owed. The cosigner may then be able to sue you for the money that the lender is trying to recover.
Fortunately, you can have your name removed, but you will have to take the appropriate steps depending on the cosigned loan type. Basically, you have two options: You can enable the main borrower to assume total control of the debt or you can get rid of the debt entirely.
A co-signer or co-borrower can request a release from a car loan, refinance the loan, pay off the loan or sell the vehicle to remove themselves from the loan agreement. It is important to communicate with the other borrower and come to an agreement on how to handle the loan before taking any action.
Remember, the primary borrower legally owns the vehicle, so an auto loan co-signer cannot take over without the consent of all parties and a refinance loan.
Removing your cosigner leaves just you to cover any late or missed monthly payments, so some lenders might make it difficult to remove the second person. Before you can remove a cosigner, you may have to prove that your finances and/or credit score have improved since getting the loan.
“Repossession is bad for both the borrower and the cosigner because both credit scores will take a hit. Late payments, loan defaults, loans sent to collections and court judgments can all be noted on the primary borrower reports and the cosigner's reports,” says Howard Dvorkin, CPA and Chairman at Debt.com.
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.
Can I sue the person I co-signed for if they don't pay? Yes, you can sue the person you co-signed for if they don't make the payments they promised to make. You may be able to get a judgment against them in court, but it could be hard to collect that money since they didn't pay the debt in the first place.
Unlike co-borrowers, who are on the title or have some claim to the property or funds, co-signers have no title or ownership of the property the funds are used for. For example, a co-signer for a vehicle has no legal right to the financed vehicle.
Being removed as a cosigner from a loan could potentially hurt your credit scores. How much your scores are impacted depends on the details of your credit profile.
You can remove the co-signer by refinancing your auto loan, receiving a co-signer release or paying off the loan. Before removing the co-signer, ensure your credit score is high enough to receive the same or comparable rate if you refinance.
If you want to sell the car by yourself, you may not be able to – you're likely to need your co-borrower to complete the sale. Both of your names are on the title, which can make selling the vehicle complicated. You're also likely to need your co-borrower's permission to transfer ownership legitimately.
Usually, when you cosign a car loan, you agree to be responsible for the debt if the primary debtor doesn't make payments or otherwise defaults on the loan. If the primary debtor defaults on the loan, then the creditor has the right to repossess the car and sell it.
A co-signer doesn't need to stay on the loan for the life of it, either. After making the required principal and interest payments, you can apply to release them and manage repayment on your own.
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. If the primary borrower doesn't make their monthly loan payment, you will be asked to make the payment.
Co-signers can make a written request to the lender to be released from a loan. In certain cases, like some student loans, there may be a provision that allows a co-signer to take their name off a loan.
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.
If you cosigned for a loan, one of the quickest routes out is to apply to the lender for a cosigner release. This lets the cosigner off the hook, so that only the primary borrower is the one listed on the loan going forward.
Co-signers agree to be held legally responsible for a debt should the primary borrower fall behind on what they owe. A co-signed debt also appears on the co-signer's credit reports and may influence their credit scores as if the debt were their own.
Removing a co-borrower or cosigner from a mortgage is possible but difficult, and your lender may insist that you pay off the mortgage in full or refinance the house by taking out a new loan solely in your name.