When shopping for a vehicle, you need to either have cash or good credit with solid proof of a certain income. When income is the primary concern, a dealership might require you to have a co-borrower. Over time, your income might improve so that you no longer need that individual to remain on the loan. The co-borrower might also want you to remove him from the loan for his own financial purposes. There are a few ways to get a co-borrower removed from an auto loan.
Depending on the situation, you may be able to remove a co-buyer's name from your loan if you request a loan modification or refinance the loan with another company. With either option, you also still need to visit the DMV to get the co-buyer's name off the title and registration.
Understand Co-Borrower vs. Co-Signer
A co-signer and co-borrower are slightly different. A co-signer simply "lends" you her credit score and promises to pay back the car loan should you default on it. The co-signer doesn't have any rights to your vehicle and you don't have to include her on the car title. However, your car title does need to list a co-borrower, as this person also has rights to the automobile whether you make your payments or not. Typically, you would only need a co-borrower if you can't show enough income to qualify for the loan.
Request a Loan Modification
You can try contacting the financial institution that issued you the loan and ask if you can have the loan modified. In many cases, this is only granted in special circumstances. For example, if the co-borrower passes away, the company will most likely accept a death certificate, charge you a loan modification fee and rewrite the loan so that you are the sole owner.
Refinance with Another Company
If you can't modify the loan, you might be able to refinance it with another company as long as your credit is good and you have proof of income that demonstrates you can make your loan payment each month. Since you've likely already paid down the loan, you'll be refinancing a lower amount than you originally did. Make sure you shop around to get the best interest rate, which will help keep the monthly payments at a price you can afford.
Visit the DMV
The last step to remove a co-borrower from having rights of ownership to your vehicle is to stop by your local department of motor vehicles to have the individual taken off the title and registration. You both must sign the back of the car title and present it to a DMV employee. To retain ownership, you can then fill out a new application for the registration and title. If the co-borrower is deceased, you'll need a death certificate as well. If the change is due to a divorce, you'll also need to provide the DMV employee with a divorce decree.
- Auto Credit Express: Being a Co-Borrower vs. a Co-Signer on a Car Loan
- NerdWallet: 6 Ways to Get Removed as a Loan or Credit Card Co-Signer
- State of Connecticut Department of Motor Vehicles: Adding, Dropping or Changing a Name on a Registration and Title
- CarsDirect: Car Loan Modification: A How To Guide