How to Remove a Cosigner from a Car Loan

Updated on April 9, 2024

At a Glance

  • A cosigner jointly signs a loan with the primary borrower, guaranteeing and taking responsibility for repayment if needed.
  • Ways to remove a cosigner from an auto loan include refinancing, paying off the balance, obtaining a cosigner release from the lender, or transferring to a 0% APR credit card.
  • Refinancing offers benefits such as lower interest rates, lower monthly payments, the ability to change lenders, and the release of the cosigner.

Qualifying for an auto loan can be difficult for those without a high income or a good credit score, so many buyers need a cosigner. However, if having a cosigner later becomes unnecessary or the cosigner no longer wants the financial responsibility, then you may want to remove them from the loan.

Removing a cosigner can be done in a few ways, including transferring the debt to a credit card or refinancing. Read the following article for a breakdown of the process of removing a cosigner from an auto loan.

What is a Cosigner?

Lenders require that a borrower meets certain eligibility requirements, typically including a minimum income and credit score. However, if the borrower cannot meet these minimum requirements, a cosigner that does meet these requirements can jointly sign the loan. The cosigner, then, guarantees the loan and will take over responsibility for repaying the loan if the primary borrower is unable.

Can a Cosigner be Removed from an Auto Loan?

People’s financial circumstances can change radically, and sometimes having a cosigner is no longer necessary or tenable. In this situation, the primary borrower may wish to remove the cosigner from the loan.

You can remove a cosigner from an auto loan, and the best way to do so is by refinancing. If you have improved your credit score or income, or if you find a lender with lower eligibility criteria, you can refinance with more favorable rates. However, there are also other strategies that you can employ to remove your cosigner.

How to Remove a Cosigner

Removing a cosigner can be done in a variety of ways, including:

  • Paying the Balanace
  • Releasing the Loan
  • Transfering to a 0% APR Credit Card
  • Refinancing the Outstanding Balance

See the following section for a summary of some of the steps that you can take to remove a cosigner from your auto loan.

Pay the Balance

If possible, the simplest way to remove a cosigner from a loan is by paying off the balance of the loan in its entirety. This will release both the cosigner and the primary borrower from any further obligations to the lender. Even if you cannot pay off the entire balance, paying off most of the loan will drastically reduce the burden and obligations of the cosigner.

However, most people simply don’t have the option of paying off their auto loans in full.

Release the Loan

Certain lenders give co-signers a release option. While the terms of release can vary, obtaining a release typically involves making a certain number of on-time payments on the loan. Also, lenders will usually complete a credit check of the primary borrower to determine creditworthiness. So, you may not be eligible for a release if the primary borrower has a poor credit score.

Lenders are reticent in providing information about whether cosigner release is an option, so you will likely have to inquire directly with your lender. Take advantage of the sample letters for requesting a cosigner release that CFPB has posted on their website.

Transfer to a 0% APR Credit Card

Borrowers who can qualify for a 0% APR credit card can get one and use it to pay off their auto loans. 0% APR credit cards typically provide a 6-18 month period where you pay zero interest. Once the loans are paid off with the credit card, the entire debt will be in the name of the credit card holder borrower, and the cosigner will be released of obligations.

However, the borrower may have to pay a balance transfer fee of 3% or 5%, which can add up to a hefty sum.

Refinance the Outstanding Balance

You can release a cosigner from your original auto loan and potentially obtain better terms and rates than your initial loan by refinancing. Refinancing simply involves taking out a new loan and using those funds to pay off your auto loans. The new loan will be in the name of the primary borrower, and the cosigner for the previous loan will be released.

When Can a Cosigner Be Removed from a Car Loan?

A cosigner can, more or less, be removed at any point during the lifetime of a loan. How you choose to go about it and your financial situation — as in the case of refinancing the loan — may impact your ability to take advanatage of some options, though.

6 Best Personal Loans to Refinance an Auto Loan to Remove a Cosigner

Refinancing an auto loan to remove a cosigner can be an important step in achieving financial independence and potentially improving loan terms. Whether you’re looking to take full responsibility for your loan or adjusting to a change in financial circumstances, choosing the right lender is crucial. Let’s explore some lenders who offer personal loans that can be used for this purpose, each catering to different credit profiles.

Spotlight Loans (Best for Bad Credit)

Achieve financial independence with Spotlight Loans‘ cosigner-free auto loan options. Whether customers are looking to remove a cosigner from an existing loan or secure a new one independently, their flexible financing solutions empower individuals to take control of their car ownership journey.

Spotlight Loans

4.8
Stilt rating
Stilt’s lender ratings reflect the findings and opinions of our editorial staff. Our scoring methodologies consider a wide array of factors and data points for every lender, offering, and financial solution.
Min. credit score

None

Fixed APR

6.63% and up

Variable APR

N/A

Overview

  • Minimum credit score: n/a
  • Variable APR: 4.99% and up
  • Loan amounts: $100 – $5,000
  • Repayment: Depends on choice of lender

Qualifications

  • Be 18 years of age or older
  • Have a checking or savings account
  • Have regular income
  • Have a fair credit rating

Pros

  • Spotlight Loans is willing to work with individuals who have less-than-perfect credit, making it a viable option for those who may struggle to secure loans from traditional lenders​​​​.
  • Spotlight Loans offers same-day approval and funding, which is beneficial for those in urgent need of funds. This makes it a good option for emergency financial situations​​.
  • Unlike traditional payday loans, Spotlight Loans provides the option to repay the loan over a period of months, offering more flexibility in repayment planning​​​​.

Cons

  • One of the most significant drawbacks of taking a personal loan with Spotlight Loans is the potentially high interest rates. With APRs that can be much higher than traditional personal loan lenders, this can lead to substantial interest payments over time​​.
  • Spotlight Loans offers loan amounts that are relatively low, which may not be sufficient for all borrowers’ needs​​​​.
  • Spotlight Loans services are not available in all states, so it’s important to check if you reside in an eligible location before applying​​.

AmOne (Best for Okay to Good Credit)

AmOne provides an effective solution for individuals with okay to good credit looking to refinance their auto loan and remove a cosigner. Their platform connects borrowers with a network of lenders, increasing the chances of finding a refinancing option that suits their needs. AmOne’s service is particularly beneficial for those who have maintained a decent credit history and are looking to take full ownership of their auto loan.

AmOne Personal Loans

4.5
Stilt’s lender ratings reflect the findings and opinions of our editorial staff. Our scoring methodologies consider a wide array of factors and data points for every lender, offering, and financial solution.
Min. credit score

600

Fixed APR

3.99%-35.99%

Variable APR

N/A

Overview

  • Minimum credit score: 600.
  • Fixed APR: 3.99%-35.99%.
  • Loan amounts: $1,000 to $50,000.
  • Repayment: 1 to 7 years.

Qualifications

  • Must be at least 18 years old.
  • Must be a U.S. citizen or permanent resident.
  • While there’s no specific income requirement, a consistent source of income is essential for the applicant.

Pros

  • Suitable for individuals with lower credit scores.
  • No cost for the matching service.
  • Attractive loan rates.

Cons

  • Acts as an intermediary, not a direct lender.
  • Risk of multiple contacts from prospective lenders.
  • Lack of clarity on lender details.

Spring Loans (Best for Bad Credit and No Credit)

Spring Loans caters to those with bad credit or no credit history who wish to refinance their auto loan and remove a cosigner. Understanding that credit history isn’t the only indicator of financial responsibility, Spring Loans offers a more inclusive approach. This can be particularly helpful for borrowers who might find it challenging to secure refinancing due to their credit status.

Spring Loans Personal Loans

4.2
Stilt’s lender ratings reflect the findings and opinions of our editorial staff. Our scoring methodologies consider a wide array of factors and data points for every lender, offering, and financial solution.
Min. credit score

None

Fixed APR

27.00%

Variable APR

N/A

Overview

  • Minimum credit score: None.
  • Fixed APR: 27.00%
  • Loan amounts: $3,000.
  • Repayment: 48 months.

Qualifications

  • Demonstrate a recurrent income.
  • Minimum age prerequisite: 18 years.
  • Validate U.S. citizenship status with an SSN.
  • Provide a legitimate U.S. driver’s license or a state identity card.
  • Establish a functional bank account for incoming deposits.
  • Adhere to any specific demands by the loan provider.

Pros

  • Open to applicants with any credit background.
  • Four-year loan period aids in structured financial management.
  • The $3,000 offer addresses several short-term financial challenges.
  • Wide-reaching eligibility criteria invite a broad spectrum of applicants.
  • The focus on dependable income over job title benefits varied income sources.

Cons

  • The set 27% APR is higher than many alternatives.
  • Restriction to a $3,000 loan might not cover all financial outlays.
  • Possessing specific IDs is mandatory, sidelining some applicants.
  • A prerequisite for an ongoing bank account may limit certain users.

First Premier Lending (Best for Bad Credit)

For borrowers grappling with bad credit, First Premier Lending can be a viable option for refinancing an auto loan to remove a cosigner. They specialize in providing personalized loan solutions, taking into account more than just credit scores. Their approach can be ideal for individuals seeking to restructure their auto loan under their sole responsibility, despite past credit challenges.

First Premier Lending Personal Loan

4.2
Stilt’s lender ratings reflect the findings and opinions of our editorial staff. Our scoring methodologies consider a wide array of factors and data points for every lender, offering, and financial solution.
Min. credit score

None

Fixed APR

27.00%

Variable APR

N/A

Overview

  • Minimum credit score: None.
  • Fixed APR: 27.00%.
  • Loan amounts: $3,000.
  • Repayment: 48 months.

Qualifications

  • Maintain a consistent source of income.
  • Must be at least 18 years of age.
  • Possess valid U.S. citizenship and a legitimate social security number.
  • Hold a current U.S. driver’s license or state-issued ID.
  • Keep an active bank account for direct deposit.
  • Satisfy any lender-specific criteria, such as credit rating, borrowing history, or place of residence.

Pros

  • No minimum credit score requirement allows accessibility for those with varied credit histories.
  • 48-month term provides clarity and allows for long-term financial planning.
  • Specific loan amount of $3,000 can meet many short-term financial needs.
  • Broad set of qualifications make the loan accessible to a wide range of people.
  • Emphasis on consistent income, not necessarily employment type, allows flexibility for borrowers.

Cons

  • A fixed APR of 27% is relatively high.
  • Loan amount is capped at $3,000, which might not cater to larger financial requirements.
  • Requirement of a U.S. driver’s license or state-issued ID could exclude some individuals.
  • Mandatory active bank account could be limiting for those who are unbanked.

Upgrade (Best for Good to Great Credit)

Upgrade is an excellent choice for individuals with good to great credit who are considering refinancing their auto loan to remove a cosigner. Known for their competitive rates and transparent terms, Upgrade can offer favorable refinancing options. Their straightforward application process makes it easier for borrowers with strong credit histories to achieve financial independence on their auto loans.

Upgrade Personal Loan

5.0
Stilt’s lender ratings reflect the findings and opinions of our editorial staff. Our scoring methodologies consider a wide array of factors and data points for every lender, offering, and financial solution.
Min. credit score

560

Fixed APR

8.49% - 35.99%

Variable APR

N/A

Overview

  • Minimum credit score: 560
  • Fixed APR: 8.49% – 35.99%
  • Loan amounts: $1,000 to $50,000
  • Repayment: 3 to 5 years (7 years on some larger loans)

Qualifications

  • Possess an active bank account.
  • Able to provide a legitimate email address.
  • Minimum age requirement: 18 years (19 for Alabama residents).
  • Credit score of 600 or higher.
  • Annual income of $25,000 or more.

Pros

  • Willing to accommodate borrowers with a credit score as low as 560.
  • Offers flexibility with a range of loan amounts from $1,000 to $50,000. This can be suitable for both small and large financial needs.
  • Provides options for repayment, allowing borrowers to choose a timeline that best suits their financial situation.
  • Once approved, borrowers can access funds in just one day, which is useful for urgent financial needs.

Cons

  • Origination fees can go as high as 9.99%, which might add a significant cost to the loan.
  • Apart from the origination fee, there are fees for late payments and failed payments, which can add up if one is not careful.
  • While there is an option to extend repayment for larger loans up to 7 years, it’s not standard for all loan amounts.

BestEgg (Best for Good Credit)

BestEgg is well-suited for borrowers with good credit looking to refinance an auto loan and release a cosigner. Their reputation for quick approvals and customer-friendly terms makes them a reliable choice. Borrowers can expect a smooth refinancing experience, potentially with better terms than their original auto loan, thereby simplifying their financial obligations and gaining sole ownership of their vehicle loan.

BestEgg Personal Loan

4.5
Stilt’s lender ratings reflect the findings and opinions of our editorial staff. Our scoring methodologies consider a wide array of factors and data points for every lender, offering, and financial solution.
Min. credit score

600

Fixed APR

8.99-35.99%

Variable APR

N/A

Overview

  • Minimum credit score: 600.
  • Fixed APR: 8.99-35.99%.
  • Loan amounts: $2,000-$50,000.
  • Repayment: 3 to 5 years.

Qualifications

  • Targets borrowers with good to excellent credit; fair credit may qualify.
  • Minimum credit score of 600.
  • At least two years of credit history.
  • Minimum annual income: $3,500 from various sources like employment, alimony, and more.
  • Debt-to-income ratio: 40%, or 65% when including a mortgage.
  • Must be a U.S. citizen.

Pros

  • Soft credit check available for pre-qualification.
  • Offers a diverse spectrum of loan amounts.
  • Provides options for secured loans.
  • Direct payments can be made to creditors for debt consolidation.
  • Late fees are not charged.

Cons

  • Charges an origination fee.
  • Doesn’t offer rate discounts.
  • Initial payment date isn’t customizable.
  • Lacks a dedicated mobile app for loan management.

4 Benefits of Refinancing Your Auto Loan

Borrowers can get a range of benefits from refinancing their auto loans. See the following section for a few examples of how refinancing can save you money and stress.

1. You Could Lower Your Interest Rate

The interest rate that you get depends on the strength of your finances, as well as the policies of the lender. If you have improved your credit score or income since you took out your initial auto loan, you may get a better interest rate on your refinanced loan. A new lender may also assess your eligibility and finances differently, so it is worth investigating refinancing even if your income or credit has not improved.

2. You Could Lower Your Monthly Payment

One benefit of refinancing is that you can choose a repayment schedule for your loan that better suits your current financial circumstances. So, if your monthly payments are too high, by extending your repayment schedule you can lower them. While this will increase the total amount that you pay, freeing up some funds in the short term can be valuable.

3. You Could Change Lenders

Some lenders are unresponsive to customers or offer poor terms and rates. By refinancing, you can switch to a new lender with better customer service, and improve your loan terms.

4. You Can Release Your Cosigner

When you refinance, you pay off all of your old auto debt and start making payments on the new loan. Since the old loans are paid off, the cosigner of those loans will be released. The borrower who refinances then solely holds the obligation to repay the loan.

Read More

Frequently Asked Questions (FAQ)

Can a Cosigner Be Removed from a Car Loan?

Yes, a cosigner can be removed from a car loan, but the process depends on the lender’s policies and the terms of the loan agreement.

How Can I Remove a Cosigner from My Car Loan?

To remove a cosigner from a car loan, you can refinance the loan in your name only, pay off the loan balance, or, in some cases, request a cosigner release from the lender if your loan agreement allows it.

What is Refinancing and How Does It Remove a Cosigner?

Refinancing involves taking out a new loan to pay off the existing car loan. This new loan would be solely in your name, effectively removing the cosigner from any obligation.

Are There Requirements for Removing a Cosigner Through Refinancing?

Requirements for removing a cosigner through refinancing include having a good credit score, stable income, and meeting the lender’s criteria to qualify for a new loan independently.

Can a Cosigner Voluntarily Remove Themselves from a Loan?

A cosigner cannot typically remove themselves voluntarily from a loan. The primary borrower must take action to refinance or pay off the loan.

Does Removing a Cosigner Affect Credit Scores?

Removing a cosigner can affect both the primary borrower’s and the cosigner’s credit scores. It depends on how the loan is removed and the status of loan repayments.

What Are the Benefits of Removing a Cosigner from a Car Loan?

Benefits include releasing the cosigner from the obligation and potential liability, and it may help the primary borrower build credit independently.

What Are the Risks of Removing a Cosigner from a Car Loan?

Risks include the potential for higher interest rates when refinancing and the responsibility of the primary borrower to manage the loan solely.

How Long Does It Take to Remove a Cosigner from a Car Loan?

The time it takes to remove a cosigner varies, depending on the method used. Refinancing can take a few weeks to a month, while paying off the loan depends on the borrower’s financial capability.

Should I Consult with the Lender Before Removing a Cosigner?

Yes, consulting with the lender is advisable to understand the process, requirements, and any potential impact on the loan terms when removing a cosigner.

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Frank Gogol

I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.

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