It isn’t easy to remove a cosigner from a car loan if you have bad credit. The only way you can typically remove or change a cosigner is by refinancing. Unless your credit has improved since taking out the loan to the point where you can qualify to refinance, you're stuck with your current cosigner.
How to Get a Cosigner off a Car Loan by Refinancing
The refinancing process can take some time, especially if your credit wasn’t in the best of shape when taking out the initial loan. Although we aren’t lenders and aren’t able to help you refinance an auto loan, we have some helpful tips you can use when preparing for the refinancing process.
The first thing you need to be aware of is your car loan payment history. When refinancing, the majority of lenders like to see at least two years of on-time payments on your current loan. Some lenders may approve you for refinancing even if your loan is under the two-year mark, but don’t be surprised if they deny you.
To get yourself ready to refinance, you should be aware of these five things before you talk to a lender:
- Your income – Know where your current financial status stands and that you meet the lender’s minimum income, debt to income, and payment to income ratio requirements.
- Your credit score – Check your FICO credit score. You can get this in many different ways, such as for free from certain credit card providers, or for a small fee from different sources such as directly from the credit bureaus (Experian, Equifax, and TransUnion). If it hasn’t improved much since taking out the loan, you may find it difficult to get approved for refinancing.
- Your monthly payments – Any missed payments with your current auto loan may result in a refinancing rejection. Lenders like to see consistent, on-time payments.
- Any additional fees – Refinancing can come with extra fees such as a loan origination fee and a fee to change the title.
- Equity – Your vehicle can’t be underwater to qualify for refinancing. You need to have equity equal to or more than the car’s actual cash value. If not, you should expect to pay the difference between the current loan balance and the vehicle’s actual cash value out of pocket. Otherwise, a lender won’t consider refinancing.
Can a Cosigner Take Over a Car Loan?
When you cosign on a car loan, your credit report lists the loan and it impacts your credit score. If you’re a cosigner, it’s important you set some ground rules and basic rights with the primary borrower. Have a game plan if the primary borrower fears they won’t be able to make next month’s payment. Remember that cosigning is a team effort, and if one or both of you fail to make a payment, you both go down together.
Legally, a cosigner doesn’t have any rights to the vehicle, even though they’re still responsible for making payments if the primary borrower can’t. It can be a tricky situation if you don’t properly prepare or aren’t confident in the primary borrower’s ability to pay.
Need a Car? We Want to Help
If you looked into having a cosigner on a car loan and have someone ready to sign, but aren’t sure where to go to get approved, let Auto Credit Express help. We work with a coast-to-coast network of dealerships with lenders available to work with people dealing with challenging credit situations. Getting the process started is simple, just complete our auto loan request form and we’ll get to work matching you with a local dealer today!