Similar to a home loan, you can be a cosigner for an auto loan. However, being a cosigner doesn't give you rights to the car that loan will purchase. A cosigner doesn't have any legal rights to the vehicle, so they can't take the car from its rightful owner, the primary borrower.
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.
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.
If the borrower does not repay the loan, you may be forced to repay the whole amount of the loan, plus interest and any late fees that have accrued. With most cosigned loans, the lender is not required to pursue the main borrower first, but can request payment from the cosigner any time there is a missed payment.
“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.
A cosigner doesn't appear on your car's title. If you have a co-owner, though, you may be able to remove them from the title if the lender has a co-signer release option. If not, you must wait until you pay the loan in full or sell the vehicle to remove them.
Cosigning a loan doesn't give you any title, ownership, or other rights to the property the loan is paying for. Your only role is to repay the loan if the main borrower falls behind on the payments or defaults.
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.
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.
Request release from a co-signed loan
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.
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.
When you're removed as an authorized user, you no longer have the privilege of using the account, and the credit card issuer will stop updating the account on your credit report.
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.
When you cosign an auto loan, you use your name and positive credit history to help a friend or family member get the car they need. 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.
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.
"Generally, you'll need the cooperation of the primary account holder to remove your name as a co-signer since, in many cases, it requires a new agreement with the lender to do so," says Leslie Tayne, a financial attorney and founder and managing director of New York's Tayne Law Group, which specializes in debt ...