Can I Remove Myself as a Co-Signer?
Yes, in a nutshell, but it’s not as simple as you might think. According to Dean Kaplan, president of the commercial debt collection company The Kaplan Group, “lenders are generally averse to removing a co-signer.” This is because the lender’s risk increases when your name is removed from the loan.
Recall that the borrower’s inability to qualify for the loan on their own is the primary reason they require a co-signer in the first place. According to Kaplan, “the lender is facing a greater financial loss if they let the co-signer off and then the borrower defaults” than if they had not released the co-signer.
The other major issue is that, typically, you don’t have many options if you want to withdraw your signature as a co-signer. Almost always, you need the primary borrower to support you. “To remove your name as a co-signer, you’ll usually need the primary account holder’s cooperation since, in many cases, it requires a new agreement with the lender to do so,” says Leslie Tayne, a financial attorney and the managing director of the debt-solutions firm Tayne Law Group in New York.
How Can a Co-Signer Get Out of the Loan?
You should take advantage of the opportunity to stop co-signing someone else’s loan if it is feasible to do so. It removes your liability and the possible hassle of entrusting someone else with your credit reputation, in addition to lowering your personal debt-to-income ratio and putting you in a better position should you ever need a loan of your own.
Here are your main options if you find yourself in a situation where you want to be taken off a loan that you co-signed:
Get a Co-Signer Release
Co-signer releases are typically offered for student loans, though they are also occasionally offered for auto loans. Although an official release would seem to be the simplest solution for a co-signer, Kaplan notes that this rarely occurs unless it was stipulated in the original loan. Ideally, before agreeing to co-sign, you should research a co-signer release.
Find the Best Student Loans Without Co-Signer
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Even if a loan does offer a co-signer release, the requirements are very specific and stringent. In fact, a 2015 report from the Consumer Financial Protection Bureau found that lenders rejected 90% of consumers who applied for co-signer release from private student loans.
According to Kaplan, in order to be eligible for co-signer release, borrowers typically need to demonstrate their ability to repay the loan on their own and that they haven’t had any late payments for a predetermined amount of time. Along with examining the borrower’s entire credit history, the lender will evaluate the borrower’s current income in relation to loan payments.
The application process itself will vary by lender. For a student loan, you might just need to complete the co-signer release form available on the lender’s website; if it’s an auto loan, you might need to draft a co-signer release letter. It’s advisable to speak with the lender to find out the next steps.
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Refinancing is another way to lose your status as a co-signer, particularly on an unsecured debt such as a student loan or personal loan. When a borrower refinances, they take out a new loan that pays off and replaces the previous one.
“The primary account holder may be able to refinance the loan in their name alone if their income or credit score has increased. They might get better loan terms, and you’ll be off the hook,” Tayne says.
In a similar vein, your co-borrower may also consider obtaining a consolidation loan, which eliminates you as a co-signer by combining all outstanding debts into a single new loan. If the borrower has high-interest credit card debt and you are listed as the account holder, this may be a wise course of action.
Refinancing or consolidating presents a challenge because the borrower must now satisfy new loan requirements. If the borrower’s income and credit haven’t significantly improved since you co-signed, the monthly payment or interest rate may increase.
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If you have an auto loan or any other kind of possession, you can always sell it and use the money from the sale to pay off the loan. Youd obviously need your co-borrower to spearhead this solution.
Pay Off the Loan
If you both or one of you have the financial means to do so, paying off your co-signed debt is the fastest way out of it. If the balance is relatively low, it might be worthwhile to handle it yourself just to avoid the stress and drama, advises Tayne. “However, make sure the account is closed after that so the other party cannot accrue additional debt associated with your name.” “.
For example, if you and your partner have a joint credit card account and you don’t close it, the other person may incur additional charges after you pay them off. According to Kaplan, “you can close the account and the co-signer is off the hook going forward once the old card has no balance.”
| Loan Type | How to Remove Yourself as a Co-Signer |
| Car loan |
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| Personal loan |
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| Student loan |
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| Credit card |
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What If You’re Not on Speaking Terms With the Primary Borrower?
There’s really no way to be legally released from your co-signer obligation if you and the original borrower have severed your ties, according to Kaplan. “Your only option is to work out a deal with the creditor to stop taking on new loans using your guarantee and to release the co-signer from further obligations once the debt is settled in full. “.
For instance, if you co-sign a credit card, you can try contacting the issuer and requesting that your co-signer status be removed for any upcoming charges on the card. “At least you won’t be liable for new charges, but you’ll still have legal liability for existing amounts due plus fees and interest going forward,” says Kaplan.
You might be able to sell your portion if you co-signed for an asset, such as a house or car, but only if your name appears on the title or deed, according to Tayne. If you co-signed for a significant other and the two of you have since broken up, this may be the case.
In the worst situation, you could speak with a lawyer and appear in court. Tayne says, “They might be able to assist you in filing an action to be removed from a loan.” For instance, if you had debt from your marriage, such as a house, you could ask the court to step in and order the sale, according to Tayne. You might also be entitled to reimbursement for the debt payments you made, contingent on the terms of the original agreement and the laws governing your jurisdiction. “.
Reviewed on June 28, 2023: An earlier version of this article was published.
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FAQ
Can a cosigner take their name off a car loan?
Regretfully, the primary borrower must take the initiative to have someone’s name removed from the contract because you have no legal claim to the vehicle. Since their name isn’t on the vehicle’s title, cosigners are unable to take possession of the vehicle they cosign for or remove the primary borrower from the loan.
Is there a way to remove yourself as a cosigner on a car?
By getting in touch with your lender, you can quickly determine whether your loan has a cosigner release option. Sell the car: You and the cosigner will be released from your payment obligations if you sell your car to a third party and utilize the proceeds to settle the remaining balance of the loan in full.
Can a cosigner remove themselves?
The Co-Signer can request a release by sending a sample letter provided by the CFPB. However, some lenders only permit the initial borrower to request a co-signer release. Ask the lender to include a co-signer release option in the loan terms as a precaution.
Can you eventually take a cosigner off a car loan?
Usually, a cosigner can be removed at any time during the loan term. Your loan paperwork might dictate specific terms, though. For instance, before they will consider releasing the cosigner, some lenders require the primary borrower to make on-time payments for 24 months.
Read More :
https://www.mariettatoyota.com/finance/car-buying-tips/can-you-remove-a-cosigner-from-a-car-loan/
https://money.usnews.com/loans/articles/how-to-remove-yourself-as-a-co-signer-on-a-loan