Getting Out of a Cosigned Car Loan
Cosigned car loans are easy to get into, and hard to get out of. When a person cosigns a car loan, he or she is taking equal responsibility for the loan. If the primary borrower cannot or does not pay the loan as agreed, the cosigner is responsible for making the payment. When a person cosigns for a loan, the loan shows up on his or her credit report and the debt also counts toward his or her overall debt to income ratio. As such, when the cosigner needs to go get credit on their own, they may find it more difficult to do. Getting out of a cosigned car loan requires the loan be refinanced without the cosigner's name on the loan, or selling the vehicle.
Refinancing the Loan
While this may seem like the logical thing to do, it is important to remember the person who needed the cosigner didn't have good enough credit to get the loan in the first place. Depending on their credit score, it may be impossible to get a lender to take a chance on them without a cosigner. Consider trading the vehicle in for an older model or cheaper vehicle to see if the original borrower can get a loan on his own. If there is not a lender who will extend credit without a cosigner, the best thing the person can do is to try to find another cosigner. If this is not possible, talk with the current lender to find out how much longer the car will need to be financed and paid on time with the cosigner before the cosigner will be able to be removed from the loan through a refinance. Sometimes, all it takes is waiting another few months.
Selling the Car
If a refinance isn't possible, or can't happen within a reasonable amount of time, the only other option to release the cosigner from the loan is to sell the vehicle and have another individual take over the payments. If the original borrower doesn't like this idea, it may take some convincing.
With how hard it can be to get out from under a cosigned car loan, many people think twice before agreeing to cosign for a loan of any kind. If there is any doubt about whether or not the person you're willing to cosign for will make the payments on their own, or any thought that you may need credit while you'd be responsible for the debt, avoid cosigning the loan in the first place.