Cosigning a loan is a really risky thing to do. Cosigners consent to accepting joint legal responsibility for repaying a loan that has been taken out by someone else. Lenders typically only ask for cosigners when the primary borrower is unable to qualify due to poor credit, no credit, or other financial difficulties. Cosigners consent to put their own credit at risk and take on legal responsibility for repaying a loan on behalf of a borrower who lenders deem to be high-risk. You might be interested in removing your name from the loan if you are currently a cosigner and are tired of the risks associated with being held legally responsible for someone else’s debt. You might also be interested in getting the cosigner off the loan if you had someone else cosign for you so that your debt won’t affect your loved one. But it depends on the circumstances whether you can remove a cosigner from the loan. Here are some ways to attempt to release a cosigner from legal responsibility for a debt:
This device is too small
To maximize your experience on a Galaxy Fold, think about unfolding your phone or using full-screen mode.
Cosigning a loan is a really risky thing to do. Cosigners consent to accepting joint legal responsibility for repaying a loan that has been taken out by someone else. Lenders typically only ask for cosigners when the primary borrower is unable to qualify due to poor credit, no credit, or other financial difficulties. Cosigners consent to put their own credit at risk and take on legal responsibility for repaying a loan on behalf of a borrower who lenders deem to be high-risk. You might be interested in removing your name from the loan if you are currently a cosigner and are tired of the risks associated with being held legally responsible for someone else’s debt. You might also be interested in getting the cosigner off the loan if you had someone else cosign for you so that your debt won’t affect your loved one. But it depends on the circumstances whether you can remove a cosigner from the loan. Here are some ways to attempt to release a cosigner from legal responsibility for a debt:
See if your loan has cosigner release
When cosigners are released from their obligation to repay loans, some lenders who require them set forth policies in advance. This is called cosigner release.
When a loan permits cosigner release, the lender lays out the terms in advance. The lender will drop the cosigner from the loan if the requirements are met. For instance, the lender might demand two years of on-time payments. If so, there would be a chance to have the cosigner removed from the loan after 24 consecutive months of payments.
If you have a cosigner release option, carefully review your loan terms. If so, get to work on fulfilling the requirements and following the procedure to have the cosigner removed from the loan as soon as you are qualified.
Cosigner release may not be a standard loan feature with your lender, but that doesn’t mean the lender won’t ever be willing to release the cosigner from liability. You can always ask.
Because doing so makes it more difficult for them to recover funds in the event that something goes wrong, lenders are typically reluctant to remove a cosigner from a loan. The lender would only be able to make a claim against the primary borrower after the cosigner defaults on the loan, but the lender has little incentive to restrict their options for recovering the debt.
However, the lender might be open to working with you if the primary borrower has made all payments on time, has an improved credit score, a good income, and has been a good customer. The worst that could happen if you ask customer service is that they will say no.
If you want to remove a cosigner from a loan but the lender won’t release the cosigner from liability, refinancing a loan is frequently your best and only choice.
Refinancing entails taking out a new loan solely in one’s own name; no cosigner will back the loan. This means the primary borrower responsible for repaying the existing loan will refinance. The money from this new loan can be applied to the cosigner’s previous loan once the primary borrower has it.
Of course, refinancing is only feasible when the primary borrower can actually meet the requirements of a new loan on his own. This won’t be an option if the problems that called for the cosigner in the first place haven’t been resolved.
The main borrower should work on raising their credit score in order to try and be approved for a loan without a cosigner. While it might take some time, timely payments of the current debt will prevent credit issues for the cosigner and assist the primary borrower in building credit so they can become eligible for a new loan in their own name.
The primary borrower must ensure that the new loan’s payments are manageable and seek out a refinance loan with the lowest personal loan interest rate possible. While it typically doesn’t make sense to refinance existing debt with a loan at a higher interest rate, doing so may make sense if it’s necessary to get rid of a cosigner. It might be worth paying a slightly higher rate to release the cosigner from his obligations and remove the debt from the cosigner’s credit report.
Where can you find a new loan?
If you plan to refinance your personal loan, you must choose which lender to use. For some of the best lenders for a range of credit scores, look through our list of the best personal loan lenders.
What if you can’t get the cosigner off the loan?
There aren’t many other options if you can’t get rid of a cosigner on a loan because you can’t refinance and the lender won’t let you,
One option is to sell the car or the house to pay off the loan if the cosigner pledged a tangible asset as collateral, such as a car loan or a mortgage loan. This is frequently undesirable, but it might be the only option if the cosigner has to remove their name from the loan for any reason.
If the primary borrower isn’t making payments, cosigners who are trying to protect their credit may also decide to pay off the loan or at least make the minimum payments. While avoiding long-term harm to the cosigner’s credit score may make it worthwhile, this is obviously not the ideal outcome. This is especially true if cosigner release is a possibility. To be released from the loan, the cosigner could pay the minimum payments for the necessary period of time. If the primary borrower defaulted, they would then no longer be liable, protecting their credit.
However, it’s important for both cosigners and primary borrowers to understand that any private agreement they come to won’t affect a creditor’s ability to collect. The creditor may still attempt to collect from you if your husband doesn’t pay if you cosigned a loan for him, even though your divorce decree stated that your husband was solely responsible for paying the debt.
Getting a cosigner removed can be a big ordeal
Cosigners can be difficult to get rid of from loans, and it’s not always possible. It’s best to avoid borrowing with a cosigner unless doing so is absolutely necessary due to the significant disadvantages of cosigning and the difficulty in removing cosigners from a loan.
Here are some other questions weve answered:
The Ascent’s best personal loans
Looking for a personal loan but unsure where to begin? Our top picks provide speedy approval and incredibly low interest rates. See our list to find the most suitable loan for you.
FAQ
How long before you can remove a co-signer from a mortgage?
For instance, the lender might demand two years of on-time payments. If so, there would be a chance to have the cosigner removed from the loan after 24 consecutive months of payments. If you have a cosigner release option, carefully review your loan terms.
How can I remove a cosigner without refinancing?
To do this, you typically file a quitclaim deed in which your ex-spouse relinquishes all ownership interests in the property. Before a notary, your ex should sign the quitclaim deed. You file this document with the county after having it notarized. This formally strikes the ex-partner’s name from the mortgage and title to the property.
Can you get out of a cosigned mortgage?
The best way to remove your name from a large cosigned loan is to request that the borrower refinance the loan without including your name on the new loan. Helping the borrower strengthen their credit history is an additional choice. To pay off the loan more quickly, you can request that the person using the funds make additional payments.
Is it hard to remove a cosigner?
You Can Have a Co-Signer Removed From a Car Loan If you previously had a co-signer but no longer require or desire that connection, you can have that co-signer removed from the loan. You can ask for the release of the co-signer, refinance the loan, or sell the vehicle and settle the initial loan.