There can be many different reasons why you need to get your cosigner off your car loan. No matter the reasons, there are two main different tactics to explore to get the job done.
Removing a Cosigner From an Auto Loan
Getting a cosigner off an auto loan means changing the auto loan contract or ending the loan. The cosigner is tied to the loan contract because they’ve agreed to repay the loan if you’re unable to, and lent you their credit to get it started. They don’t have rights to the vehicle, though, since their name is never listed on the title.
If you need to remove a cosigner, you don’t actually need their permission to do so. If you want to sell the vehicle and pay off the loan, you’re well within your rights to move forward with it. There are two ways to remove a cosigner: 1) refinance the vehicle, or 2) pay off the loan to end the contract.
1. Refinancing to Remove a Cosigner
Many bad credit and new borrowers ask a cosigner for help to get an auto loan because of a lower credit score. When you're approved for a car loan with the help of a cosigner, you have the chance to improve your credit score by maintaining the auto loan. Staying current on the payments can really do wonders for bad credit.
If your credit score has improved due to good payment history on the car loan, you may qualify for refinancing by yourself. Refinancing replaces your loan with a new one on the same vehicle, and many people look for another lender to refinance with. If you qualify, your cosigner is released from their responsibility, since the original loan is paid off by the refinancing lender.
Besides removing a cosigner or a co-borrower, refinancing can offer you the opportunity to lower your interest rate or change other terms of the car’s loan. In most cases, you can either lower your interest rate or extend the loan term to get smaller monthly payments – but you have to qualify.
Some common refinancing requirements include:
- Your vehicle must have less than 100,000 miles and be less than 10 years old
- Your car has equity (when you owe less on the loan than the vehicle’s value)
- You’ve had the loan for at least one year
- You’ve never missed a car payment on the loan
Remember that to qualify for a lower interest rate or even for refinancing, you’re likely to need a better credit score then when you first started the original auto loan.
2. Selling the Vehicle to Remove a Cosigner
If you’re ready to get another vehicle and remove the cosigner from your current loan, then selling the car could be a two-birds-one-stone move. As we mentioned, your cosigner doesn’t need to be present for the sale of your vehicle or have to give you the go-ahead to sell.
If you completely pay off the auto loan with the sale of your vehicle, you and the cosigner are both off the car loan. And, if your car has equity, that equity can even be used to lower the selling price of your next vehicle. Trade-in equity can help meet a lender’s down payment requirement, as well.
However, many borrowers ask a cosigner to help because their credit score doesn’t meet a lender’s requirements. If your credit score still isn’t the greatest, and refinancing isn’t an option, then trading in the car for something else and financing with a subprime lender may be the next step.
Subprime lenders assist borrowers are equipped to help borrowers with spotty credit histories or who are in tough credit spots such as bankruptcy, repossession, and no credit. If you’re worried about your chances of getting approved for a car loan alone, a subprime lender could be your chance to get an auto loan without the help of a cosigner.
Need Auto Financing Connections?
On the hunt for your next car loan but need the help of subprime lenders? Then let us point you in the right direction at The Car Connection! We’ve created a nationwide network of dealerships that specialize in assisting borrowers with credit challenges.
To get matched to a dealer in your area that’s signed up with subprime lenders, fill out our auto loan request form. There’s never an obligation to buy once you’re matched to a dealer, and our form is quick and always free to complete.