Can You Get a Cosigner Off a Loan?

See if your loan has cosigner release

Some lenders that require cosigners establish policies upfront for when cosigners can be absolved of their legal responsibility to repay loans. This is called cosigner release.

When a loan allows cosigner release, the lender sets conditions upfront. If the conditions are met, the lender will remove the cosigner from the loan. The lender may require two years of on-time payments, for example. If that’s the case, after the 24th consecutive month of payments, there’d be an opportunity to get the cosigner off the loan.

Review your loan terms carefully to find out if you have cosigner release as an option. If you do, start working on meeting the conditions and follow the process for the cosigner to be removed from the loan as soon as you become eligible.

Ask your lender

If your lender does not have cosigner release as a standard loan feature, that doesn’t mean the lender will never be willing to absolve the cosigner of responsibility. You can always ask.

Lenders will usually be reluctant to remove a cosigner from a loan because doing so makes it harder for them to collect if something goes wrong. Once the cosigner is no longer on the loan, the lender would only be able to pursue a claim against the primary borrower – and the lender has little reason to limit their options for collecting on the debt.

But, if the primary borrower has made all payments on time, has an improved credit score and a good income, and has been a good customer, the lender may be willing to work with you. You can contact customer service to find out – the worst that could happen is they’ll say no.

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Refinance the loan

Refinancing a loan is often the best and only option if you want to get a cosigner off a loan and the lender won’t release the cosigner of liability.

Refinancing means the primary borrower responsible for repaying the existing loan will take out a new loan that’s only in his or her own name – no cosigner will guarantee the loan. Once the primary borrower has this new loan, the money from it can be used to pay back the existing loan with the cosigner. Not only is this an option even in cases where removing a cosigner isn’t allowed, but in many situations it’s an easier process than taking the steps to remove the cosigner.

Of course, refinancing is possible only in circumstances where the primary borrower can actually qualify for a new loan on their own. If the issues that necessitated the cosigner in the first place haven’t yet been resolved and the borrower still has bad credit, this will not be a viable option.

Primary borrowers should focus on improving their credit so they can try to qualify for a loan without a cosigner. While it may take some time, on-time payments of the existing debt will both spare the cosigner credit problems and help the primary borrower build credit so they’ll qualify for a new loan in their own name.

The primary borrower should look for a refinance loan with the lowest personal loan interest rate possible, and should make sure payments on the new loan are affordable. While it normally doesn’t make sense to take out a loan at a higher interest rate to refinance existing debt, it may make sense to do this – if necessary – when the goal is to remove a cosigner. Paying a slightly higher rate may be worth absolving the cosigner of his responsibilities and getting the debt off the cosigner’s credit report.

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