How to Get Out of a Cosigned Car Loan

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Getting out of a cosigned car loan isn't easy. Since the borrower needed your help to qualify for the loan in the first place, the lender won't just take your name off the note. If the borrower has improved her credit and finances since the loan was originated, however, you may have a shot at having your name removed.

Communicating with the Borrower

According to Bankrate, cosigners usually don't have many rights when it comes to getting loan information from the lender. It's unlikely that you'll be able to call to the lender to discuss having your name removed. As a result, you'll need to communicate with the primary borrower and let him know you want to have your name taken off the loan.

If you explain why you need to have your name taken off the loan, the borrower may be more willing to explore other options. For example, if you've lost your job or otherwise are unable to fulfill your responsibilities as a cosigner, this can incentivize the borrower to find someone else to take your place or try to qualify on her own.

Releasing a Cosigner

Ask the borrower to contact the lender to determine what the options are for removing your name. In some cases, borrowers can ask the lender to release the cosigner after making a specified number of payments. Unless that's documented in the original loan agreement, however, lenders normally don't agree to remove cosigners because it doesn't benefit them in any way. Removing the cosigner increases the lender's risk, which is a chance most aren't willing to take.

Refinancing the Loan

The primary borrow can refinance the loan to pay off the existing loan and close the account. Her credit score and income must be sufficient enough to qualify for a loan without you.

If she's already had the car for a few years, it may be easier for her to qualify for financing on the lower loan balance. A history of timely payments each month should have helped boost her credit score. With a score of at least 680, she can expect an average interest rate. If her score is lower than 680 she may get approved, but with a high interest rate.

Encourage the borrower to check her credit report for any errors or discrepancies. If everything looks good on her credit report, she can contact lenders to compare interest rates. Have her start with her local bank or credit union.

In addition, if her score isn't high enough, she can use another cosigner or apply with a co-borrower. For example, she can ask a parent, relative or spouse to help her by cosigning on the loan instead of you.

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