When you refinance a car loan, you’re replacing an existing loan with a new loan, (hopefully) with better rates and terms. When it comes to a cosigner, you’ll have the option to keep them, remove them, or add one if necessary when you refinance. But whether or not you can refinance at all depends on your credit and how much it has improved since first taking out your loan.

Keeping Your Cosigner

Car Loan Refinancing How to Keep, Add, or Drop a CosignerRemember that a cosigner puts their credit on the line for you, and it’s impacted by your payments. This means missed car payments will hurt their credit just as much as they hurt yours. Also keep in mind that if you fall behind on auto loan payments, it’ll be up to your cosigner to pick up the slack, so it’s best to communicate with them at the first sign of any problems.

If it’s getting difficult to keep up with your loan due to changes in your financial situation, refinancing may be able to help. Refinancing is commonly done when you need to lower your monthly payment by reducing the interest rate or extending your loan term, or to remove a cosigner. If your credit hasn’t improved enough to go it alone, keeping a cosigner when you refinance may give you the boost you need to get approved for a better interest rate or longer loan term, making it easier to keep up with your payments.

Adding a Cosigner to Your Auto Loan

If you were able to qualify for an auto loan by yourself and something has changed with your credit or financial situation, it may be possible to refinance your car and add a cosigner to help. By adding their credit to the picture, you may be able to qualify for better rates and terms than you’d be able to on your own.

Removing a Cosigner From a Car Loan

The most common situation that occurs in refinancing with a cosigner is to remove them from your loan. This is usually only an option if your credit has improved enough for you to qualify for the new loan on your own. It typically takes at least two years of full, on-time payments to see this kind of improvement if you were required to have a cosigner on your original bad credit auto loan.

If you plan on doing this, make sure you’re prepared to take on the new loan term, payments, and interest rate. If you’re able to qualify for a loan without a cosigner, but you’re still working on building your credit, be aware that your interest rate may still be higher than you’d like. But with consistent, timely payments on your auto loan, and all your other bills, your credit should continue to climb.

For All Refinancing Situations

If you’re considering refinancing a car with a cosigner, make sure you look at all the options, and know how they’ll impact both you and your cosigner. Keep in mind that when you refinance, your loan has to be current, your car has to have equity, and your loan amount and vehicle have to be acceptable to the new lender. If these things aren’t doable, you may have to wait to refinance, or look for alternatives such as discussing your situation with your current lender to see if they’re able to renegotiate your existing loan, or even possibly trading in or selling your vehicle.

Alternatives to Refinancing Auto Loans

Maybe refinancing isn’t going to work out for you, but you still need to make a change. If you’ve kept up with your loan – even if your credit hasn’t improved as much as you’d like – you may be surprised to find that you might qualify for better rates or terms on a newer vehicle. If you’re considering trading in your current car instead of refinancing, Auto Credit Express wants to help you find the right place to do this.

We work with a nationwide network of special finance dealers that have lenders available to help people who have less than perfect credit. It’s free and there’s never any obligation to buy. All you have to do is fill out our simple auto loan request form and we can get started finding you a local dealer that’s right for you.