Entering a car loan with a co-signer can seem like a good idea initially, but in some cases, plans may not work out as intended. The relationship between the primary borrower and the co-signer may go south, or the finances of the co-signer could change and, as a result, the co-signer wants out of the deal.

While it is possible to remove a co-signer from a loan, simply replacing one co-signer with another on the original loan is unlikely. The process is more complex and can involve refinancing the loan, completing co-signer release paperwork or simply paying the loan in full to end the co-signer’s involvement.

You cannot add a co-signer to an existing loan

Most lenders won’t simply replace a current co-signer with a new one on an existing car loan because it would require them to essentially go through the approval process for a new auto loan.

While it never hurts to ask the lender about this possibility, swapping one co-signer for another on an existing loan is not standard practice.

You may have heard of loan modification before and might wonder if it’s an option. Modification is a process that typically applies to the terms and conditions of a loan and is not meant to modify the parties who signed on to the loan. It’s also generally reserved for situations where you might struggle to afford payments and need to work with your lender to stay current on the loan.

Swap co-signers by refinancing

A better approach to adding or eliminating a co-signer on an auto loan is to refinance the loan. In other words, open an entirely new loan that pays off the existing loan’s balance and closes the account.

Whether you refinance with a new lender or the same one, you’ll have the choice to apply with the same co-signer, a different co-signer or no co-signer at all.

Just keep in mind that you’ll need to qualify for the new loan. That could be hard to do without a co-signer if you haven’t improved your credit since originally purchasing the car.

Remove a co-signer with a co-signer release

While not all lenders offer this option, it is sometimes possible to remove a co-signer by completing a co-signer release.

  1. Contact the lender: Your first step is contacting the lender who financed the loan and find out whether it offers a co-signer release option.
  2. Complete the required paperwork: If the lender offers a release option, you will typically need to complete paperwork that eliminates the co-signer from the loan and makes you the primary borrower responsible for the repayment of the loan. Only the primary borrower is allowed to make this change on the loan.
  3. Lender approval: There’s no guarantee a lender will approve the co-signer release. You will need to prove that you can handle the loan on your own, including having an acceptable credit score and financial resources to maintain repayment.

When making this type of change, your loan term may be changed. Eliminating a co-signer may also affect the interest rate on your loan, particularly if the loan was originally approved based on the co-signer’s good credit.

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.

Think carefully before asking someone to co-sign a loan for you in the first place, and be sure you select someone you trust.