How to Get Someone off Your Car Loan

Some first time car buyers don’t have the credit worthiness necessary to secure a loan independently. Other buyers don’t have an extensive credit history, which makes finding a lender more difficult. A co-signer on a loan could help these individuals buy the automobile they want and secure the financing they need. In addition, married couples serve as ‘co-borrowers’ who typically have a joint car loan.

A divorce or maybe even a bump in credit might motivate a car owner to find a way to own the vehicle independently. Car owners might look for ways on how to get someone off of your car loan. Can a car owner remove a co-signer to a loan or a co-borrower?  Here’s what buyers need to know.

The Difference Between a Co-Borrower and a Co-Signer

The terms ‘co-borrower’ and ‘co-signer’ as they relate to financing are not interchangeable. Both options have very different implications as they relate to loan obligations and even property ownership.

A co-borrower is another individual who helps secure the financing for a vehicle, home, etc. Spouses, family members or partners could be co-borrowers.

Two borrowers also could offer two unique credit scores. In addition, both borrowers’ income is included when applying for the loan. Both borrowers’ credit scores could help the interest rate for the loan and make the payments more affordable for the borrowers.

Co-borrowers share both the ownership of the property and the liability, too. Both are equally impacted if payments are late. However, both also share in a credit reporting benefit when payments are timely.

While co-borrowers share liability and ownership, co-signing on a loan works differently. A co-signer doesn’t have any ownership of the property; the co-signer isn’t included on a title (however, the lender is included). Co-signing on a loan means that the co-signer will take on payment responsibilities if the main signer (or borrower) does not make payments.

Essentially, the co-signer is almost a form of collateral for a lender. The co-signer provides an extra layer of protection for the lender. Investopedia explains that a co-signer could be beneficial when the original borrower is trying to secure a better interest rate or loan terms or if the borrower wants to borrow beyond their approved principal.

The bottom line is that a co-borrower takes on financial responsibility of a loan if the primary borrower fails to make payments or defaults but has no ownership interest in a vehicle. However, co-borrowers are both responsible for making payments on the loan and both own the vehicle (both names will appear on the title).

How to Get Someone off Your Car Loan Who is a Co-Borrower

A co-borrower or a co-owner has a share of ownership in a car (or home).  One borrower cannot remove another borrower from the loan or a title without taking proper legal steps.

In the case of a divorce, property may be legally divided between the former spouses. The divorce paperwork and legal documents could allow one spouse to re-title a vehicle (one without a loan) in their name and take sole ownership.  However, the legal process of this would likely go through the court system and both parties would need to sign off and agree.  

Dividing property could be much easier when the property doesn’t have an attached loan. In the case of a car that is still being paid off, one spouse also might need to refinance the loan. This would then involve other legal issues related to titling.

Those going through a divorce also could just sell the vehicle. They would then use the proceeds to pay off the loan and perhaps divide the remaining profit (if a profit exists). Selling would remove both co-borrowers from the loan and the vehicle. However, before selling a car with a loan, borrowers would need to contact the lender.

How to Get Someone off Your Loan Who is a Co-Signer

Those who want to remove a co-signer from their loan have a simple solution: pay off the vehicle. Once the vehicle is paid in full, the lender will provide lien release documentation that removes the lender from the title, too. A paid loan removes responsibility from both the main borrower and the co-signer.

Not all borrowers have the financial means to pay a loan in full. In this case, the borrower could simply keep making timely payments.

There could be another way to remove a co-borrower, according to The Motley Fool. Some lenders offer a ‘co-signer release’ option. The site explains that the lender will detail the stipulations of a co-signer release in the loan paperwork.  Borrowers also could call their lender to inquire if a co-signer release is an option.

What about refinancing the loan? Could a borrower simply refinance the loan to remove the co-signer? The Motley Fool reports that refinancing is a viable option and could in fact be the only other option to remove a co-signer if the lender hasn’t detailed a co-signer release.

However, borrowers might want to check their credit score to better understand their credit worthiness (or risk) and determine if refinancing is the best solution.

Co-Borrowers and Co-Signers: Are they Beneficial for Securing a Loan?

While car owners might be looking for ways to remove a co-borrower or a co-signer, other car buyers might wonder if having a co-signer or a co-borrower is beneficial.

In the case of married couples, applying for a loan as co-borrowers ensures both dual financial responsibility and dual ownership of the vehicle. In addition, co-borrowers have both their income and their individual credit scores assessed for loan terms and rates. Couples could qualify for better terms or lower interest rates when they buy the car as co-borrowers.

Some buyers also might need a co-signer to secure a loan. Perhaps their credit score is low or they simply don’t have a significant credit history. A co-signer helps decrease the lender’s risk and could help the borrower to secure more favorable financing.

Co-signing on a loan, though, has its share of risks. The co-signer is responsible for payments if the borrower fails to meet their financial obligations. Co-signers need to understand their responsibility when signing on the dotted line.

Use Carzing to Understand Financing Options

Car buyers can use Carzing to shop for a vehicle that meets their driving needs and fits their budget, too. Search for vehicles by make/model, price or body type.

When buyers find the best car, they also can use Carzing to get pre-qualified for financing. Carzing will prompt buyers to enter information about work history and house payments (mortgage or rent). Buyers will then see all the loan options for which they might qualify.

Getting pre-qualified doesn’t require an individual to enter their social security number. The pre-qualification is considered a soft credit inquiry and has no impact on a credit score.

However, this process can help buyers better understand the financing options that might be available to them. In order to get pre-approved for their preferred financing, though, buyers should print out a voucher from Carzing (with their loan option) and present it to a participating dealership.

At the dealership, buyers will complete a credit application and better understand their loan terms and rates. Before visiting the dealership, though, buyers also can review their credit report to learn more about their credit worthiness; this can help them better determine what rates might apply to them and if a co-signer might be necessary.