Rateworks auto loan refinance
March 8, 2024

How Do I Remove a Cosigner from a Car Loan?

Wondering how to remove a cosigner from a car loan? Learn more about your options and steps in the process here.

Woman with her car after removing a cosigner
Written by

Jennifer Moore

When people borrow money, whether it's for buying a house, going to college, or getting a car, lenders often ask for a cosigner. A cosigner is someone who promises to pay back the loan if the main borrower can't. This practice is pretty common because it makes lenders feel safer about giving out money. 

A cosigner might be needed for car loans if the person buying the car doesn't have enough credit history or income on their own. However, there might come a time when you want or need to remove a cosigner from a car loan. The cosigner may want their responsibility to end, or you can now handle the loan alone. 

So, how do you remove a cosigner from a car loan and possibly from the car title, too? In this article, we'll dive into the steps and important things you need to know before trying to remove a cosigner.

A cosigner removing himself from a loan

What is a cosigner, and why would you use a cosigner on a car loan?

A cosigner is a backup payer for a loan. When you're buying a car and need a loan, the lender wants to be sure they'll get their money back. If your financial history isn't strong—maybe you're young and haven't had time to build credit, or you've had money troubles in the past—a lender might not be convinced you can pay them back on your own. This is where a cosigner comes in. They're someone with a better financial standing who promises to pay the loan if you can't, giving the lender peace of mind.

Here are some reasons you might use a cosigner on your car loan:

  • Limited or no credit history: If you're new to managing credit or haven't had a loan before, a cosigner can help you qualify.
  • Low credit score: A cosigner with a high credit score can make up for your lower score, improving your loan terms.
  • Income concerns: If your income isn't high enough by the lender's standards, a cosigner can assure that the loan will be covered.
  • Debt-to-income ratio: If you have other debts, a cosigner helps reassure the lender that the car loan payments will be made. As a side note, a good debt-to-income ratio is 43% or below.

Choosing a cosigner with a strong payment history, good credit score, and solid income is crucial because they're your safety net. But remember, if you're thinking about how to remove a cosigner from a car loan, you'll need to be ready to take on full responsibility for the payments. Failing to make payments on time can hurt your credit score, lead to repossession of the car, and damage the financial relationship with your cosigner.

Why remove a cosigner from a car title?

Removing a cosigner from a car title is a specific process that differs from taking them off the car loan. While removing a cosigner from a loan alters who is responsible for the debt, removing them from the title changes who legally owns the vehicle. 

There are several reasons you might want to remove a cosigner from a car title:

  • Taking sole financial control: As you become more financially stable, you should take full ownership and responsibility for your car, reflecting your independence and sole ownership in the car's title.
  • Cosigner's request: The cosigner might wish to be released from any legal obligations related to the car. This could be due to changes in their financial situation, a desire to reduce their debt load, or personal reasons like a relationship change between the cosigner and the primary owner.
  • Change in credit or financial situation: If your financial situation or credit score improves, you may no longer need a cosigner to reassure lenders or title-holding entities of your ability to manage and own the asset entirely on your own.

In each case, removing a cosigner from a car title involves legal steps, such as transferring the title, which might require the lender's approval if the car is still under a loan. It's a significant step towards financial autonomy and requires careful consideration and, often, legal or financial advice.

Toy car and keys to a car with a cosigner

How do you remove a cosigner from a car loan?

Removing a cosigner from a car loan is an important step for many borrowers who initially needed a cosigner to qualify for their loan. There are a few key ways to achieve this:

Pay off the loan

The most straightforward method to remove a cosigner from a car loan is by paying off the loan. This could mean paying the remaining balance in full, which releases both you and the cosigner from any further payment obligations. 

If paying off the loan in one lump sum isn't feasible, making significant payments towards the loan's principal can also alleviate the financial responsibilities of the cosigner. However, this option might not be suitable for everyone due to the need for a substantial amount of money upfront.

Refinance the loan

Refinancing your car loan is a practical way to remove a cosigner. This process involves securing a new loan to pay off the original loan, effectively transferring the loan solely into your name. Refinancing can offer several benefits, such as potentially lower monthly payments, reduced interest rates, and the opportunity to improve your credit score through independent payments. 

RateWorks provides professional assistance for those looking to refinance their auto loans, offering a pathway to remove a cosigner and potentially improve your loan's terms. 

Each option has its own set of considerations, and the right choice depends on your financial situation, the terms of your current loan, and the relationship with your cosigner.

Finding the right path forward: How do I remove a cosigner from a car loan?

Removing a cosigner from a car loan is a significant financial step that can impact both the primary borrower and the cosigner. Whether you're considering paying off the loan, seeking a cosigner release, or refinancing your loan, weighing each option carefully is important. 

The question of "How do I remove a cosigner from a car loan?" involves understanding your financial situation, the terms of your current loan, and your goals for the future. It's important to do your research and consult financial professionals to make an informed decision. Choosing the right method to remove a cosigner will depend on your individual needs and preferences. 

If you want to refinance or need advice on removing a cosigner, we encourage you to start by visiting our application page today. Take the first step towards financial independence and choose the best choice for you.