The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here's an explanation for .
When your credit score is less than perfect or you’re just starting to build a credit profile, having a co-signer can help you get a car loan. But if your circumstances change over time or your credit score improves and you would like to remove the co-signer from your loan, there are three primary options. You can refinance, get a co-signer release or pay off the loan.
Options for removing a co-signer from a car loan
Having a co-signer on an auto loan is a great way to get approved by lenders if your credit score is less than ideal because it gives your lender added assurance that you will pay off the loan. But those with added financial responsibility alongside the main borrower may want to exit due to a variety of reasons.
One way to remove a co-signer from your loan is to refinance. To do this you will take out an entirely new loan, possibly with a different lender. When you do this, the old agreement is closed and you start from scratch with a new loan that won’t be attached to the co-signer anymore.
Refinancing can also be an opportunity to lower the interest rate on your car loan or even the monthly payment by extending the loan term.
Keep in mind that in order to gain approval for a refinance you will need to have been making your monthly payments on time and have good to excellent credit.
Get a co-signer release
To get a co-signer release you will first need to contact your lender. After contacting them you can request the release — if the lender offers it. This is just paperwork that removes the co-signer from the loan and places you, the primary borrower, as the sole borrower on the loan.
One of the drawbacks to this approach is that your initial loan term and interest rate may be impacted. This is especially true if your approval was dependent on your co-signer’s good credit. If the co-signer is released from the loan your lender may adjust your current terms. You will also have to show a history of timely payments before the lender y agrees to release the co-signer. It’s also important to note that not all loans include a a co-signer release option, so it’s wise to look into this prior to agreeing to a loan.
Pay off the loan
The most painless way to remove a co-signer is to simply pay off the car loan. If the removal is due to financial strain this may not be the most practical option but paying off the loan in full will rid the responsibility of both the primary borrower and the co-signer.
To do this, you will be expected to pay off the current loan balance along with the payoff amount. You will have to contact your lender for the specific methods of paying off your loan, especially if the pay-off timeline is earlier than initially agreed upon.
The removal of a co-signer can be a time-consuming process, so it’s best to think before agreeing to a co-signed loan. And you should only go ahead with a removal in very specific circumstances.
If you do decide to proceed with removing a co-signer, research your options carefully to determine which approach makes the most sense for you. If you’re considering refinancing your loan or obtaining a co-signer release, review your credit score and payment history to make sure your financial profile will allow you to qualify for a loan on your own.