Driving down a deserted highway with the top down and the wind in your hair as you proceed to your next adventure is the epitome of what it means to be free. But far too frequently, it becomes the exact opposite: a trap.
There are numerous justifications for joint car loans. They might be married, and it should be considered joint property anyhow. Someone who is unable to obtain a car loan on their own may occasionally have a parent or friend cosign the loan for them.
In any case, even if you begin these interactions and loans with the best of intentions, sometimes those motives turn sour. You might be wondering how to get out of that cosigned or co-borrowed auto loan when that happens.
There are ways to do it, but first and foremost, it will depend primarily on your circumstances.
If you had a co-signer on the original loan but no longer need or want that connection, you can have that co-signer removed from the loan. You can request a co-signer release, refinance the loan, or sell the car and pay off the original loan.
Factor #1: Cosigner, or Co-Borrower?
Whether you are a cosigner or a co-borrower is the first thing you must decide. They sound similar, and they are in some ways. For instance, whether they are a cosigner or a co-borrower, everyone listed on the loan is ultimately responsible for repaying it.
Cosigners Are Only Responsible for the Loan
In a cosigner situation, one borrow is the primary borrower. Typically, that person is the one who will use the vehicle and is primarily responsible for its repayment. For instance, if a parent cosigns on a loan for their 18-year-old daughter, the daughter will be the one to drive the vehicle and will be primarily accountable for payments.
But if she stumbles and falls behind, the parents are responsible for covering the costs. In that case, the lender will pursue Mom and Dad for the money. Even worse, the daughter’s and the parent’s credit reports will both show the late payments, potentially ruining both of their credit scores.
If you have a cosigned loan, that is a terrifying thought to have, but at least the harm will only be done to your credit history. That’s not necessarily the case if you’re a co-borrower, however.
Co-Borrowers Are Responsible for the Loan and the Car
You are still accountable for a loan even if you co-borrow it. But in the eyes of the lender, you share responsibility and bear the same payment obligations as the other borrower. You’re not just a fallback plan to get paid, in other words. If someone doesn’t pay the loan, they’ll immediately come to you and the other person.
However, one of the biggest distinctions is that co-borrowers have a claim to the vehicle as well. The title will be in both of your names. For instance, if you co-borrowed a loan with your boyfriend, you both jointly own the vehicle. And this has a significant impact on your options for paying off the auto loan.
Factor #2: How Cooperative Is the Other Person?
“Unfortunately, you need some cooperation,” says Leslie Tayne, Esq., and founder of Tayne Law Group. “I’ve had many people come in here saying, ‘What do I do now?’ I say, ‘You can’t do anything.’ Without their cooperation, it’s just not going to happen.”
This is especially true in the case of co-borrowers. You’ll typically need their consent before making any significant changes, such as refinancing it out of their name, retitling it in your name, selling the car, etc., since they are also a joint owner of the vehicle. It can be extremely annoying, especially if you and the other person are no longer speaking.
Factor #3: Are There Any Written or Legal Agreements in Place?
The fundamental guidelines for co-signing and co-borrowing loans have been discussed. But occasionally, those regulations are ignored, especially if there is an existing contract in force, such as a prenuptial agreement, a divorce judgment, or even just a handwritten and signed contract.
For instance, Tayne claims that the separation of a husband and wife is a frequent instance of car loans being involved in divorce proceedings. “There are two sides to the question of who is responsible for [paying the loan] and who keeps the car. There’s the divorce side of it, and the legal side. Sometimes they actually are unable to refinance things, but one of them is still in charge. ”.
For instance, a stay-at-home spouse may be instructed to refinance their car loan in their own name by the divorce decree, but they may not actually be able to do so. According to the decree, even though they no longer have any legal claim to it, even though the car is technically theirs and theirs alone, the other spouse will still be responsible for paying the loan because they are unable to refinance.
Because it does come up frequently in divorces, it does add a very interesting perspective, according to Tayne.
You don’t need to be married to need an agreement. It’s a good idea to have a written agreement in place whenever money is exchanged. Make sure to clearly state who is in charge of each task as well as what will happen if they fail to complete it. This will assist in keeping your options open in case you later have a falling-out.
It’s time to examine your options now that we have considered the variables that could affect them.
Option #1: Get a Cosigner Release
One of the quickest ways out if you cosigned for a loan is to request a cosigner release from the lender. As a result, the cosigner is released from responsibility, and going forward, only the primary borrower will be listed on the loan.
It’s not quite so simple, however. There is a reason you may have initially been requested to sign as a cosigner on someone else’s loan. The primary borrower’s ability to make timely payments on their own wasn’t entirely in the lender’s confidence.
Because of this, cosigner release applications are typically only accepted from borrowers who have a solid history of making all of their loan payments on time over a period of several years. And not all lenders will agree to it, either. The only way to learn if a lender provides a cosigner release option is to contact the lender and inquire about it.
Unfortunately, if you’re a co-borrower on the loan, you can’t use this option.
Option #2: Refinance the Loan
You can always try to refinance in your own name, regardless of whether you’re a cosigner or co-borrower (or, for that matter, if you’re the only person listed on the loan at all). With this choice, you may also be able to get better interest rates, loans with different terms, and/or smaller monthly payments.
However, it again depends on whether you are a cosigner or co-borrower.
If there is a co-borrower, Tayne says, “You’re going to have difficulty refinancing it without the consent of the other party.” Once more, if your co-borrower isn’t cooperating with you, that could be challenging.
It can also be challenging if you originally required the co-borrower or cosigner in order to obtain the loan. You’ll have to demonstrate that your own good credit and income allow you to be approved for a new loan. There are fortunately plenty of lenders willing to refinance your auto loan even if your credit is less than perfect since there is no minimum credit score requirement.
Be sure to weigh the benefits and drawbacks of refinancing before signing anything.
Option #3: Pay Off the Loan
Easier said than done, right? The average used car loan was $20,554 in 2019, according to a recent Experian study. If you had enough extra cash lying around to pay off the loan, chances are you would have already done it by now.
But you can sell the car to get the cash you need to pay off the loan. If you’re attached to the car, it might be difficult, but think about what might happen if something goes wrong. You might be responsible for the payments if the other person decides to leave town and stop making payments.
Once more, if you have a co-borrower, you must obtain their consent before selling the vehicle because legally, it is also their vehicle.
Remember to Retitle the Car
If you’re a co-borrower, you’ll also need to take into account who is on the title in addition to getting your ex off the loan, which is one thing. Normally, the car title lists both borrowers, which you might want to avoid if you and your ex have permanently broken up. There may not be much you can do to stop them from taking the car away from you if the other person is also listed on the title.
Fortunately, you might be able to avoid this in this situation. Check the owners listed on your car’s title. Specifically, look for “and/or” in between your names. It should only take one of you to retitle the car in your own name if there is an “or,” as in “John Doe or Jane Doe.” However, if there is an “and,” as in “John Doe and Jane Doe,” both of you must visit your state’s motor vehicle department and give your approval before the vehicle can be retitled in just one person’s name.
Bottom Line
“Think before you sign and have an agreement is my best advice,” Put everyone’s responsibilities in writing so that everyone is aware of them, advises Tayne. And if something arises, at least you have a written record of it. In the event that you need to appear in court, having something in writing may give you some legal standing. ”.
Everyone should have a written exit strategy, and it’s a good idea to keep that in mind going forward. But as of right now, requesting a cosigner release is probably the best way to get rid of a cosigner from a car loan. Refinancing or selling the car are your other two options if that isn’t an option or if you’re a co-borrower on the loan.
Personal finance expert Lindsay VanSomeren has contributed to numerous websites, including Credit Karma, LendingTree, The Balance, and Experian. Currently, she shares a home in Kirkland, Washington, with her husband, a dog, two cats, and She relishes outdoor activities, reading, and homebrewing in her free time.
Your budget may have more breathing room if you secure a lower interest rate on your auto loan. Your monthly budget can suffer significantly if you have an auto loan. However, if your interest rate is too high, your monthly car payment may end up being much higher than it should be. Drivers able to lock….
America continues to guzzle gas even as the Biden administration makes efforts to embrace electric vehicles in an effort to reduce global warming. The amount of gas that a state’s residents use can vary depending on a number of factors, such as how far they travel, the type of public transportation that is offered, and the level of the gas tax. ….
Here are the requirements for a refinance if you want to upgrade your auto loan. Your personal finances aren’t static, they’re fluid. Perhaps you recently received a raise at work or your credit scores rose. In either case, you might have improved your standing with lenders and raised your chances.
Read our 11854 Certified Reviews
Reduce your interest rate to save an average of $96* per month on your payments!
FAQ
Can you take your name off a co signed car loan?
Fortunately, you can have your name removed, but depending on the cosigned loan type, you will need to take the proper steps. Essentially, you have two choices: You can allow the primary borrower to take full control of the debt or you can completely eliminate the debt.
How can a cosigner get out of the loan?
…
- Transfer the balance to a 0% card. …
- Get a loan release. …
- Consolidate or refinance the debt. …
- Remove your name from a credit card account. …
- Sell the financed asset.
Does removing a cosigner affect your credit?
However, once you remove the cosigner from your loan, their credit score won’t be affected by your payment history. To keep your credit scores apart, remove them from your auto loan.
Does cosigner have rights to car?
Co-borrowers have equal ownership rights and are typically spouses. A cosigner, on the other hand, is someone who agrees to the car loan in order to assist the primary borrower in getting approved. A cosigner does not have ownership rights to the vehicle, but a coborrower does.